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With the holiday season approaching, income tax issues for the current year are unlikely to be top-of-mind for most Canadians — and planning for taxes for the upcoming 2022 tax year may seem too remote to even be considered. However, most Canadians will start paying their taxes for 2022 with the first paycheque they receive in January of 2022, little more than a month from now. It’s worth taking a bit of time now to make sure that things start off — and stay — on the right foot.

With the holiday season approaching, income tax issues for the current year are unlikely to be top-of-mind for most Canadians — and planning for taxes for the upcoming 2022 tax year may seem too remote to even be considered. However, most Canadians will start paying their taxes for 2022 with the first paycheque they receive in January of 2022, little more than a month from now. It’s worth taking a bit of time now to make sure that things start off — and stay — on the right foot.

For most Canadians, (certainly for the vast majority who earn their income from employment), income tax, along with other statutory deductions like Canada Pension Plan contributions and Employment Insurance premiums, are paid periodically throughout the year by means of deductions taken from each paycheque received, with those deductions then remitted to the Canada Revenue Agency on the taxpayer’s behalf by his or her employer.

Of course, each taxpayer’s situation is unique and so the employer has to have some guidance as to how much to deduct and remit on behalf of each employee. That guidance is provided by the employee/taxpayer in the form of TD1 forms which are completed and signed by each employee, sometimes at the start of each year, but certainly at the time employment commences. Each employee must, in fact, complete two TD1 forms — one for federal tax purposes and the other for provincial tax imposed by the province in which the taxpayer lives. Federal and provincial TD1 forms for 2022 (which have not yet been released by the Canada Revenue Agency (CRA) but, once published, will be available on the CRA website at https://www.canada.ca/en/revenue-agency/services/forms-publications/td1-personal-tax-credits-returns/td1-forms-pay-received-on-january-1-later.html) list the most common statutory credits claimed by taxpayers, including the basic personal credit, the spousal credit amount, and the age amount. Adding amounts claimed on each form gives the Total Claim Amounts (one federal, one provincial) which the employer then uses to determine, based on tables issued by the CRA, the amount of income tax which should be deducted (or withheld) from each of the employee’s paycheques and remitted on his or her behalf to the federal government.

While the TD1 completed by the employee at the time his or her employment commenced will have accurately reflected the credits claimable by the employee at that time, everyone’s life circumstances change. Where a baby is born, or a son or daughter starts post-secondary education, there is a separation or a divorce, a taxpayer turns 65 years of age, or an elderly parent comes to live with his or her children, the affected taxpayer(s) will often become eligible to claim tax credits not previously available. And, since the employer can only calculate source deductions based on information provided to it by the employee, those new credit claims won’t be reflected in the amounts deducted at source from the employee’s paycheque.

Consequently, it’s a good idea for all employees to review the TD1 form prior to the start of each taxation year and to make any changes needed to ensure that a claim is made for any and all credit amounts currently available to him or her. Doing so will ensure that the correct amount of tax is deducted at source throughout the year.

As well, it’s often the case that a taxpayer will have available deductions which cannot be recorded on the TD1, like RRSP contributions, deductible support payments, or child care expenses. While such claims make things a little more complicated, it’s still possible to have source deductions adjusted to accurately reflect those claims, and the employee’s resulting reduced tax liability for 2022. The way to do so is to file Form T1213, Request to Reduce Tax Deductions at Source (available on the CRA website at https://www.canada.ca/en/revenue-agency/services/forms-publications/forms/t1213.html) with the CRA. Once that form is filed with the CRA, they will, after verifying that the claims made are accurate, provide the employer with a Letter of Authority authorizing that employer to reduce the amount of tax being withheld from the employee’s paycheque. 

Of course, as with all things bureaucratic, having one’s source deductions reduced by filing a T1213 takes time. While a T1213 can be filed with the CRA at any time of the year, the sooner it’s done, the sooner source deductions can be adjusted, effective for all subsequent paycheques. Providing an employer with an updated TD1 for 2022 as soon as possible, along with filing the T1213 with the CRA where circumstances warrant, will ensure that source deductions made starting January 1, 2022 will accurately reflect all of the employee’s current circumstances, and consequently his or her actual tax liability for the year.

During the month of December, it’s customary for employers to provide something “extra” for their employees, by way of a holiday gift, a year-end bonus, or an employer-sponsored social event. Once again this year, as in 2020, there is unlikely to be an annual office holiday party; however, employees may still be able to look forward to something additional in the way of compensation during the last month of the year. In fact, given the current labour shortage and the difficulties employers are having attracting and retaining employees, there may be an added incentive for employers to show their appreciation to current employees by means of a holiday gift or bonus.

During the month of December, it’s customary for employers to provide something “extra” for their employees, by way of a holiday gift, a year-end bonus, or an employer-sponsored social event. Once again this year, as in 2020, there is unlikely to be an annual office holiday party; however, employees may still be able to look forward to something additional in the way of compensation during the last month of the year. In fact, given the current labour shortage and the difficulties employers are having attracting and retaining employees, there may be an added incentive for employers to show their appreciation to current employees by means of a holiday gift or bonus.

What such employers certainly don’t want to do is to create a tax liability for their employees. Unfortunately, it’s also the case that a failure to properly structure such gifts or other extras can result in unintended and unwelcome tax consequences to those employees.

Trying to formulate and administer the tax rules around holiday gifts is something of a no-win situation for the Canada Revenue Agency (CRA). On an individual or even a company level, the amounts involved are usually small, or even nominal, and the range of situations which must be addressed by the related tax rules are virtually limitless. As a result, the cost of drafting and administering those rules can outweigh the revenue generated by the enforcement of such rules, to say nothing of the potential ill will generated by imposing tax consequences on holiday gifts or parties. Notwithstanding, the potential exists for employers to provide what would otherwise be taxable remuneration in the guise of holiday gifts, and it’s the responsibility of the tax authorities to ensure that such situations don’t slip through the tax net.

There is, as a result, a detailed set of rules which outline the tax consequences of gifts and awards provided by the employer. The starting point for the rules is that any gift (cash or non-cash) received by an employee from his or her employer at any time of the year is considered to constitute a taxable benefit, to be included in the employee’s income for that year. On its website, the CRA indicates that the following types of gifts/bonuses/reimbursements will result in a taxable benefit to the employee:

• cash or near-cash gifts and awards such as Christmas or holiday bonuses or near-cash gifts and awards such as gift certificates;
• points that can be redeemed for air travel or other rewards; or an internal points system where an employee earns points and can redeem them for items from a catalogue;
• reimbursements from an employer to an employee for a gift or an award that the employee selected, paid for, and then provided a receipt to the employer for reimbursement; and
• hospitality rewards such as employer-provided team building lunches and rewards in the nature of a thank you for doing a good job.

While the above listing may seem comprehensive, the CRA does make an administrative concession in this area, allowing non-cash gifts (within a specified dollar limit) to be received tax-free by employees, as long as such gifts are given on religious holidays such as Christmas or Hanukkah, or on the occasion of a significant life event, like a birthday, marriage, or the birth of a child.

In sum, the CRA’s administrative policy is simply that non-cash gifts to an arm’s length employee, regardless of the number of such gifts, will not be taxable if the total fair market value of all such gifts (including goods and services tax or harmonized sales tax) to that employee is $500 or less annually. The total value over $500 annually will be a taxable benefit to the employee, and must be included on the employee’s T4 for the year, and on which income tax must be paid.

It’s important to remember the “non-cash” criterion imposed by the CRA, as the $500 per year administrative concession does not apply to what the CRA terms “cash or near-cash” gifts and all such gifts are considered to be a taxable benefit and included in income for tax purposes, regardless of amount. For this purpose, the CRA considers anything which could be easily converted to cash as a “near-cash” gift. Even a gift or award which cannot be converted to cash will be considered to be a near-cash gift if, in the CRA’s words, it “functions in the same way as cash”. So, a gift card or gift certificate which can be used by the employee to purchase his or her choice of merchandise or services would be considered a near-cash gift, and taxable as such. It’s not hard to see that drawing a firm line between cash and non-cash gifts can be difficult. The CRA provides the following information and examples to help clarify that difference.

Example of a near-cash gift or award

You give your employee a $100 gift card of gift certificate to a department store. The employee can use this to purchase whatever merchandise or service the store offers. We consider the gift card or gift certificate to be an additional remuneration that is a taxable benefit for the employee because it functions in the same way as cash.

Example of non-cash gifts or awards

You give your employee a voucher (which may be a ticket or certificate) that entitles the employee to receive an item for a set value at a store. For example, you may give your employees a voucher for a turkey valued up to $30 as a Christmas gift, and for convenience, you arrange for your employees to go to a particular grocery store and exchange the voucher for a turkey. The employees can only use the voucher to receive a turkey valued up to $30 (no substitutes).

It may seem nearly impossible to plan for employee holiday gifts and other benefits without running afoul of one or more of the detailed rules and administrative policies surrounding the taxation of such gifts and benefits. However, designing a tax-effective plan is possible, if the following rules are kept in mind.

Any cash or near-cash gifts should be avoided, as they will, no matter what the amount, create a taxable benefit to the employee. Although gift certificates or pre-paid credit cards are a popular choice, they aren’t a tax-effective one, as they will invariably be considered by the CRA to create a taxable benefit to the employee.

Where non-cash holiday gifts are provided to employees, gifts with a value of up to $500 can be received free of tax. The employer must be mindful of the fact that the $500 limit is a per-year and not a per-occasion limit. Where the employee receives non-cash gifts with a total value of more than $500 in any one taxation year, the portion over $500 is a taxable benefit to the employee.

While the rules around employer gifts aren’t complex, they are detailed, and it’s necessary to consider carefully the kinds of gifts which are given and to be mindful of the annual $500 per employee limit on non-cash gifts. At the end of the day, a gift which results in unintended and unwanted tax consequences is unlikely to engender much holiday spirit or goodwill on the part of the employee who receives it.

For individual Canadian taxpayers, the tax year ends at the same time as the calendar year. What that means for individual Canadians is that any steps taken to reduce their tax payable for 2021 must be completed by December 31, 2021. (For individual taxpayers, the only significant exception to that rule is registered retirement savings plan contributions; with some exceptions, such contributions can be made any time up to and including March 1, 2022, and claimed on the return for 2021.)

For individual Canadian taxpayers, the tax year ends at the same time as the calendar year. What that means for individual Canadians is that any steps taken to reduce their tax payable for 2021 must be completed by December 31, 2021. (For individual taxpayers, the only significant exception to that rule is registered retirement savings plan contributions; with some exceptions, such contributions can be made any time up to and including March 1, 2022, and claimed on the return for 2021.)

While the remaining time frame in which tax planning strategies for 2021 can be implemented is only a few weeks, the good news is that the most readily available of those strategies don’t involve a lot of planning or complicated financial structures — in many cases, it’s just a question of considering the timing of steps which would have been taken in any event. What follows is a listing of some of the steps which should be considered by most Canadian taxpayers as the year end approaches.

Charitable donations

The federal government and all of the provincial and territorial governments provide a tax credit for donations made to registered charities during the year. In all cases, to claim a credit for a donation in a particular tax year, that donation must be made by the end of that calendar year — there are no exceptions.

There is, however, another reason to ensure donations are made by December 31. The credit provided by each of the federal, provincial, and territorial governments is a two-level credit, in which the percentage credit claimable increases with the amount of donation made. For federal tax purposes, the first $200 in donations is eligible for a non-refundable tax credit equal to 15% of the donation. The credit for donations made during the year which exceed the $200 threshold is, however, calculated as 29% of the excess. For the minority of taxpayers who have taxable income (for 2021) over $216,511, charitable donations above the $200 threshold can receive a federal tax credit of 33%.

As a result of the two-level credit structure, the best tax result is obtained when donations made during a single calendar year are maximized. For instance, a qualifying charitable donation of $400 made in December 2021 will receive a federal credit of $88 ($200 × 15% + $200 × 29%). If the same amount is donated, but the donation is split equally between December 2021 and January 2022, the total credit claimable is only $60 ($200 × 15% + $200 × 15%), and the 2022 donation can’t be claimed until the 2022 return is filed in April 2023. And, of course, the larger the donation in any one calendar year, the greater the proportion of that donation which will receive credit at the 29% level rather than the 15% level.

It’s also possible to carry forward, for up to 5 years, donations which were made in a particular tax year. So, if donations made in 2021 don’t reach the $200 level, it’s usually worth holding off on claiming the donation and carrying forward to the next year in which total donations, including carryforwards, are over that threshold. Of course, this also means that donations made but not claimed in any of the 2016, 2017, 2018, 2019, or 2020 tax years can be carried forward and added to the total donations made in 2021, and the aggregate then claimed on the 2021 tax return.

When claiming charitable donations, it’s possible to combine donations made by oneself and one’s spouse and claim them on a single return. Generally, and especially in provinces and territories which impose a high-income surtax — currently, Ontario and Prince Edward Island — it makes sense for the higher income spouse to make the claim for the total of charitable donations made by both spouses. Doing so will reduce the tax payable by that spouse and thereby minimize (or avoid) liability for the provincial high-income surtax.

Claiming home office expenses

As pandemic restrictions have eased and lockdowns ended, some employees have begun to return to the office on at least a part-time basis. However, there’s no question that millions of employees have spent at least a part of the 2021 tax year working from home. There are a lot of benefits to a work from home arrangement, and one of them is the ability to claim a tax deduction on the 2021 tax return for household costs that would have been incurred in any event.

In order to claim a deduction for costs related to a work from home space, employees must meet at least one of the following conditions:

• the home work space is where the individual mainly (more than 50% of the time) does their work; or
• the individual uses the workspace only to earn his or her employment income—he or she must also use it on a regular and continuous basis for meeting clients, customers, or other people in the course of his or her employment duties.

To establish that the required circumstances exist, and that the employee is not receiving an allowance or a reimbursement for home office expenses from the employer, it’s necessary to have a particular form completed and signed by that employer. That form, the T2200, can be found on the CRA website at https://www.canada.ca/en/revenue-agency/services/forms-publications/forms/t2200.html.

Once the requisite criteria are met, and certified by the employer on the T2200, a broad range of costs become deductible by the employee. Specifically, a salaried employee can claim and deduct the part of specified costs that relate to his or her work space, such as the cost of electricity, heating, home maintenance, and home internet access (but not internet connection) fees.

Where an individual who qualifies under either of the criteria outlined above is a commission employee, an even broader range of costs become deductible. In addition to costs for electricity, heating, home maintenance, and home internet access fees, a commission employee can also deduct a proportionate share of costs incurred for property taxes and home insurance.

There is no specific formula provided for determining the proportion of eligible costs which can be deducted for qualifying home office expenses. The employee can determine that percentage based on the square footage of the workspace as a percentage of the overall square footage of the home, or he or she can make that calculation based on the number of rooms in the house or apartment relative to the number of rooms used for work-related purposes. Whichever method is chosen, the most important consideration is that the approach taken (and the expenses claimed) be reasonable. In all cases, the Canada Revenue Agency (CRA) can ask the taxpayer to provide documentation and support for claims made.

In order to determine the amount of any deduction for eligible home office expenses which can be claimed on the return for 2021, it’s necessary to gather together bills and receipts for the various expense categories (utilities bills, property tax notices, etc.). It’s a tedious and sometimes time-consuming task, but necessary both in order to determine the amount of any available deduction and to have the required documentation for that deduction available should the CRA ask to see it. The T2200 signed by the employer does not have to be filed with the return but should also be kept as part of that documentation.

It should be noted that, for the 2020 tax year, the CRA permitted employees working from home to claim a home office deduction without the need to obtain a T2200 from the employer, or to calculate and document specific expenses as outlined above. However, when that administrative concession was announced, the CRA indicated that it was to be made available for the 2020 taxation year only. There has been no indication to date that such concession will be provided for 2021; consequently, employees should assume that, in order to claim a deduction for home office expenses for 2021, it will be necessary to follow the detailed steps outlined above.

Reviewing tax instalments for 2021

Millions of Canadian taxpayers (particularly the self-employed and retired Canadians) pay income taxes by quarterly instalments, with the amount of those instalments representing an estimate of the taxpayer’s total liability for the year.

The final quarterly instalment for this year will be due on Wednesday December 15, 2021. By that time, almost everyone will have a reasonably good idea of what his or her income and deductions will be for 2021 and so will be in a position to estimate what the final tax bill for the year will be, taking into account any tax planning strategies already put in place, as well as any RRSP contributions which will be made before March 1, 2022. While the tax return forms to be used for the 2021 year haven’t yet been released by the CRA, it’s possible to arrive at an estimate by using the 2020 form. Increases in tax credit amounts and tax brackets from 2020 to 2021 will mean that using the 2020 form will likely result in a slight overestimate of tax liability for 2021.

Once one’s tax bill for 2021 has been calculated, that figure should be compared to the total of tax instalments already made during 2021 (that figure can be obtained by checking one’s online tax account on the CRA website, or by calling the CRA’s Individual Income Tax Enquiries line at 1-800-959-8281). Depending on the result, it may then be possible to reduce the amount of the tax instalment to be paid on December 15 — and thereby free up some additional funds for the inevitable holiday spending!

In October, the federal government outlined the next stage of its pandemic recovery benefit programs, which focused on provided support to businesses in the economic sectors hit hardest by the pandemic. Among the programs introduced was the Tourism and Hospitality Recovery Program (the “Program”), and details of the eligibility requirements for that Program, and the kinds of assistance to be provided, have now been announced.

In October, the federal government outlined the next stage of its pandemic recovery benefit programs, which focused on provided support to businesses in the economic sectors hit hardest by the pandemic. Among the programs introduced was the Tourism and Hospitality Recovery Program (the “Program”), and details of the eligibility requirements for that Program, and the kinds of assistance to be provided, have now been announced.

Few sectors of the economy were more negatively affected by the pandemic than tourism and hospitality, and consequently the support to be provided is substantial, and the list of businesses eligible for that support is lengthy and wide-ranging.

The basic eligibility requirements for the Program are relatively straightforward, in that organizations are required to meet the following two conditions to qualify:

• an average monthly revenue reduction of at least 40%, as measured from March 2020 to March 2021; and
• a current-month revenue loss of at least 40%.

Qualifying organizations which meet the revenue loss conditions will be eligible for wage and rent subsidies for the period of October 24, 2021 to May 7, 2022. Actual subsidy rates will start at 40 percent for eligible organizations with a 40-per-cent current-month revenue loss, increasing thereafter in proportion to current-month revenue loss up to a maximum rate of 75 percent for those with a current-month revenue decline of 75 percent or higher.

Full subsidy rates (based on percentage revenue loss) will be provided for the period from October 24, 2021 to March 12, 2022. Those subsidy rates will then be reduced by half from March 13 to May 7, 2022.

The list of the types of organizations which can qualify for purposes of the Tourism and Hospitality Program is lengthy and comprehensive.

Set out below is an edited listing of the information found on the Finance Canada website, comprising the types of organizations which will qualify for purposes of the Program (assuming, of course, that the applicable revenue loss criteria are met). As well, in order for organizations in these categories to qualify, at least 50% of their pre-pandemic revenues must have been earned from carrying on one or more of the following activities:

• operating or managing a facility providing short-term lodging;
• preparing and serving meals, snacks and beverages made to order for immediate consumption on or off the premises;
• operating a travel agency or as a tour operator;
• organizing, promoting, hosting, supporting, or participating in events that meet the artistic or cultural interests of their patrons, including live performances;
• preserving and exhibiting objects, sites and natural wonders of historical, cultural or educational value;
• organizing, promoting, or supporting scenic and sightseeing tours;
• providing charter bus services;
• operating or managing an amusement or theme park;
• operating or managing a facility or providing services that enable patrons to participate in recreational activities;
• operating or managing serviced or unserviced sites to accommodate campers and their equipment for tents, tent trailers, travel trailers, and recreational vehicles, excluding mobile home sites;
• operating or managing an overnight recreational camp, such as a children's camp, a family vacation camp, or an outdoor adventure retreat;
• operating or managing a hunting camp or a fishing camp;
• operating or managing a duty-free retail store at a land border crossing where the only exit route is to the United States;
• operating or managing a facility that is primarily engaged in exhibiting motion pictures;
• operating or managing an amusement arcade;
• operating a facility allowing passengers to board and leave a cruise ship;
• operating or managing an airport;
• operating or managing a casino;
• promoting a destination or region in Canada for the purpose of attracting tourism;
• organizing, planning, promoting, hosting or supporting conventions, trade shows or festivals, weddings, parties, or similar events.

In each of the categories listed above, Finance Canada has provided specific examples of the types of businesses which fit into that particular category. Detailed information on the categories and businesses included in each category can be found on the Finance Canada website at https://www.canada.ca/en/department-finance/news/2021/11/types-of-business-eligible-for-the-tourism-and-hospitality-recovery-program.html.

Generally speaking, the only major exclusions from the list of qualifying organizations for purposes of the Program are:

• facilities primarily engaged in retailing food or beverage products, such as a supermarket or a convenience store;
• golf, golf instruction and the ownership or operation of a facility that is a golf course, a golf driving range, or a golf clubhouse;
• country clubs; and
• professional sports clubs, teams, or leagues or facilities used primarily by such organizations.

More information on the Program is available on the Finance Canada website at https://www.canada.ca/en/department-finance/news/2021/10/targeting-covid-19-support-measures.html.

Canadians are fortunate to have a publicly funded health care system, in which most major medical expenses are covered by provincial health care plans. Such plans are not, however, comprehensive, and there is consequently a large (and growing) number of medical and para-medical costs — including dental care, prescription drugs, physiotherapy, ambulance trips, and many others — which must be paid for on an out-of-pocket basis by the individual. In some cases, such costs are covered by private insurance, usually provided by an employer, but not everyone benefits from such coverage. Self-employed individuals, those working on contract, or those whose income comes from several part-time jobs do not usually have access to such private insurance coverage. Fortunately for those individuals, our tax system acts to help cushion the blow by providing a medical expense tax credit to help offset out-of-pocket medical and para-medical costs which must be incurred.

Canadians are fortunate to have a publicly funded health care system, in which most major medical expenses are covered by provincial health care plans. Such plans are not, however, comprehensive, and there is consequently a large (and growing) number of medical and para-medical costs — including dental care, prescription drugs, physiotherapy, ambulance trips, and many others — which must be paid for on an out-of-pocket basis by the individual. In some cases, such costs are covered by private insurance, usually provided by an employer, but not everyone benefits from such coverage. Self-employed individuals, those working on contract, or those whose income comes from several part-time jobs do not usually have access to such private insurance coverage. Fortunately for those individuals, our tax system acts to help cushion the blow by providing a medical expense tax credit to help offset out-of-pocket medical and para-medical costs which must be incurred.

The bad news for such individuals is that while a tax credit is available, the computation of eligible expenses and determining when a claim for the credit should be made can be confusing. In addition, the determination of which expenses qualify for the credit and which do not isn’t necessarily intuitive, nor is the determination of when it’s necessary to obtain prior authorization from a medical professional in order to ensure that the contemplated expenditure will qualify for the credit. For instance, in order to claim the medical expense tax credit for the cost of a walker, it is necessary to obtain a prescription for that walker from a doctor. Where costs are incurred to purchase a wheelchair, those costs are eligible for the medical expense credit, with no requirement that a prescription be obtained.

The basic rule is that qualifying medical expenses (a lengthy list of which can be found on the Canada Revenue Agency website at https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/about-your-tax-return/tax-return/completing-a-tax-return/deductions-credits-expenses/lines-33099-33199-eligible-medical-expenses-you-claim-on-your-tax-return.html) over 3% of the taxpayer’s net income, or $2,421, whichever is less, can be claimed for purposes of the medical expense tax credit on the taxpayer’s return for 2021.

Put in more practical terms, the rule for 2021 is that any taxpayer whose net income is less than $80,700 will be entitled to claim medical expenses that are greater than 3% of his or her net income for the year. Those having income of $80,700 or more will be limited to claiming qualifying expenses which exceed the $2,421 threshold.

The other aspect of the medical expense tax credit which can cause some confusion is that it’s possible to claim medical expenses that were incurred prior to the current tax year but weren’t claimed on the return for the year that the expenditure was made. The actual rule is that the taxpayer can claim qualifying medical expenses incurred during any 12-month period which ends in the current tax year, meaning that each taxpayer must determine which 12-month period ending in 2021 will produce the greatest amount eligible for the credit. That determination will obviously depend on when medical expenses were incurred so there is, unfortunately, no universal rule of thumb that can be used.

Medical expenses incurred by family members — the taxpayer, his or her spouse, children who were born in 2004 or later, and certain other dependent relatives — can be added together and claimed by one member of the family. In most cases, making that claim on the tax return of the lower income spouse is best, in order to maximize the amount claimable, where that spouse has tax payable for the year.

As the end of the calendar year approaches, it’s a good idea to add up the medical expenses which have been incurred during 2021, as well as those paid during 2020 and not claimed on the 2020 return. Once those totals are known, it will be easier to determine whether to make a claim for 2021 or to wait and claim 2021 expenses on the return for 2022. And, if the decision is to make a claim for 2021, knowing what medical expenses were paid, and when, will enable the taxpayer to determine the optimal 12-month period for that claim.

Finally, it’s a good idea to look into the timing of medical expenses which will have to be paid early in 2022. Where those are significant expenses (for instance, a particularly costly medication which must be taken on an ongoing basis, or some expensive dental work) it may make sense, where possible, to accelerate the payment of those expenses to December 2021, where that means they can be included in 2021 totals and claimed on the 2021 return.

Working from home — and certainly work from home arrangements on the scale experienced over the past 19 months — would not be practically possible without the use of technology. And of all the available technology, cell phones and internet service are the two essentials without which work-from-home arrangements almost literally can’t function.

Working from home — and certainly work from home arrangements on the scale experienced over the past 19 months — would not be practically possible without the use of technology. And of all the available technology, cell phones and internet service are the two essentials without which work-from-home arrangements almost literally can’t function.

Almost everyone, of course, already had a cell phone and at-home access to the internet when work-from-home arrangements became necessary. However, when workplaces closed and employees began working from home on a massive scale early in 2020, it soon became apparent that most employees would need to upgrade their existing services to meet the demand resulting from one (or more) family members working from home or engaged in online schooling.

In some cases, the employer was prepared to subsidize those increased costs, or even to cover cell phone and internet costs entirely. Such an arrangement, however, raises the question of when employer-provided cell phones and internet service are simply the tools needed by an employee to do his or her job — and when they become more than that and constitute benefits to the employee, which must be included in income, and on which tax must be paid.

Not surprisingly, the Canada Revenue Agency (CRA) has formulated and issued an assessing policy on the circumstances in which taxable benefits arise. And, perhaps also not surprisingly, given the wide range of cell phone and internet service plans available, that assessing policy is a bit complicated. And, most important from the employee’s point of view, the way in which an employer pays for (or reimburses) an employee’s cell phone and internet costs can by itself determine whether such assistance has no tax consequences or becomes a taxable benefit and/or income in the hands of the employee.

There are several types of costs involved in acquiring and using a cell phone and using internet service, as follows, and each has its own set of tax consequences.

The first cost is that of acquiring a cell phone. If the employer purchases a cell phone and provides it to the employee to enable them to carry out their employment duties, the cost of that cell phone is not a taxable benefit to the employee. However, if the employee purchases the phone and is then reimbursed by the employer for that cost, the fair market value of that cell phone is a taxable benefit to the employee — and that taxable benefit is assessed even if the employee uses the phone for employment-related purposes.

The next category of cell phone related costs is that of a cell phone service plan, of which there are an almost limitless range of options at different cost levels. Where an employer pays for (or reimburses) the cost of the employee’s cell phone plan, the portion of the cost attributable to employment-related cell phone use does not, reasonably enough, create a taxable benefit to the employee. Where (as would most often be the case) the cell phone is used for both employment and personal purposes, the portion of the cost attributable to personal use is treated as a taxable benefit to the employee, unless the employee reimburses the employer for that personal use portion.

In order to make that allocation, of course, it would be necessary to calculate the number of minutes of cell phone use that was attributable to personal use and that which was used for employment-related purposes. The amount of record keeping required to do so is likely more than most employees and employers would be willing to undertake. In recognition of that reality, the CRA has arrived at a reasonable administrative policy to deal with the issue. Under that policy, an employee’s personal use of an employer-paid cell phone plan will not result in a taxable benefit to the employee if all of the following three criteria are met:

• the cost of the plan is reasonable;
• the plan is a basic plan with a fixed cost; and
• the employee’s personal use of the service does not result in charges that are more than the basic plan cost.

In light of the administrative positions and policies put forward by the CRA, the best way to avoid unwanted tax consequences would seem to be for the employee to use a cell phone provided by the employer, to have the employer buy a fixed-price plan which provides the most generous airtime provision that can be justified by the employee’s employment-related use of the phone, and to keep the total business and personal use minutes under the basic airtime limit. Where that’s the case it won’t matter, in any given month, what the allocation between personal and employment use is.

Unfortunately, the CRA has not formulated a similar administrative policy with respect to employer-paid internet services at home. Where the employer pays for (or reimburses the employee for) the cost of an internet service at home to help the employee carry out employment duties, only the portion of that service used for employment purposes is not a taxable benefit. Put another way, where personal use is made of an employer-provided at-home internet service, the portion of the cost attributable to that personal use will (unless the employee is reimbursed by the employer for such costs) result in a taxable benefit to the employee. How such allocation is to be arrived at, as a practical matter, is a question left up to the employer, who must be prepared to determine both the percentage of employment use and the fair market value of that use and, if asked, to justify the position taken to the CRA.

One final note — where the employer provides an employee with an allowance for cell phone or internet services, that allowance must, in all circumstances, be included in the employee’s income for the year.

Throughout the pandemic, the federal government has provided businesses with a number of support programs, some of which operated to subsidize the wage and rental costs of those businesses. Some of those programs were scheduled to expire on November 20, 2021; however, in its most recent announcement made October 21, 2021, the federal government indicated that one program — the Canada Recovery Hiring Program (CRHP) — would be extended, possibly until July 2, 2022. In addition, two new programs will be implemented to address the needs of businesses in sectors particularly hard hit by the pandemic. The affected programs are as follows.

Throughout the pandemic, the federal government has provided businesses with a number of support programs, some of which operated to subsidize the wage and rental costs of those businesses. Some of those programs were scheduled to expire on November 20, 2021; however, in its most recent announcement made October 21, 2021, the federal government indicated that one program — the Canada Recovery Hiring Program (CRHP) — would be extended, possibly until July 2, 2022. In addition, two new programs will be implemented to address the needs of businesses in sectors particularly hard hit by the pandemic. The affected programs are as follows.

Canada Recovery Hiring Program

The CRHP, which was scheduled to expire on November 20, 2021, provides qualifying employers with a wage subsidy. Generally, qualifying employers are those who have experienced a revenue loss of at least 10%, as measured against a baseline period of March 14 to April 10, 2021. The subsidy rate for the October 24 to November 20, 2021 period was set at 20%.

The latest government announcement proposes some changes to the CRHP. First, the subsidy rate for the October 24 to November 20, 2021 period is to be increased to 50%. Second, the CRHP will be extended (at the new subsidy rate of 50%) until at least May 7, 2022. The federal government may opt to further extend the program until July 2, 2022.

Under the proposed extension, the existing baseline period of March 14 to April 10, 2021, would continue to be used in calculating the benefit. The existing eligibility rules would also continue to apply, including the required revenue decline of more than 10%.

Tourism and Hospitality Recovery Program

Few sectors of the economy have been hit harder by the pandemic than tourism and hospitality. In light of that reality, the federal government will be introducing the Tourism and Hospitality Recovery Program. That program will provide support to hotels, tour operators, travel agencies, and restaurants, by providing wage and rent subsidy programs.

Hardest-Hit Business Recovery Program

The second new program to be introduced is not sector-specific but instead focuses on any business which has experienced and continues to experience significant revenue loss.

In order to be eligible for the Tourism and Hospitality Recovery Program, a business must demonstrate an average monthly 40% revenue reduction between March 2020 and February 2021, as well as a current-month revenue loss of at least 40%. For purposes of the Hardest-Hit Businesses Recovery Program, revenue reductions for the comparable periods must be at least 50%.

The benefit rate which may received under each program is also different. Under the Tourism and Hospitality Recovery Program, the maximum subsidy rate is 75%. That maximum rate under the Hardest-Hit Businesses Recovery Program is 50%.

In addition, businesses which are affected by temporary new local lockdowns may be eligible for support at the same subsidy rates which are available through the Tourism and Hospitality Recovery Program. Those subsidy rates will be provided throughout the period of the lockdown, regardless of whether the business has previously experienced revenue losses during the pandemic.

Businesses which are eligible for either of the Tourism and Hospitality Recovery Program or the Hardest-Hit Businesses Recovery Program will also both be eligible for the Canada Emergency Rent Subsidy at an enhanced rate. Under current rules, there is a monthly cap on eligible expenses that can be claimed under the Canada Emergency Rent Subsidy of $75,000 per business location and $300,000 in total for all locations. As part of the October 21 announcement, the federal government indicated that the monthly cap would (for businesses eligible for benefits under either the Tourism and Hospitality Recovery Program or the Hardest-Hit Businesses Recovery Program) be increased from $300,000 to $1 million, starting on October 24, 2021.

Both the Tourism and Hospitality Recovery Program and the Hardest-Hit Businesses Recovery Program will be available until May 7, 2022, with the proposed 75% and 50% subsidy rates, respectively, available through to March 12, 2022. From March 13, 2022, to May 7, 2022, the subsidy rates will decrease by half.

Details of the two new programs, including benefit periods and applicable subsidy rates,  can be found on the federal government website at https://www.canada.ca/en/department-finance/news/2021/10/targeting-covid-19-support-measures.html. Details of the Canada Recovery Hiring Program are available on the same website at https://www.canada.ca/en/revenue-agency/services/subsidy/recovery-hiring-program.html.

Since the Canada Recovery Benefit (CRB) replaced the Canada Emergency Response Benefit (CERB) just over a year ago, more than 2 million individual Canadians have applied for the CRB, a benefit which paid $900 (pre-tax) per week until July 17 of this year, and $600 (pre-tax) per week thereafter. For the most recent benefit period for which figures are available (September 12-25, 2021), 821,560 Canadians received the CRB. In total, just over $27 billion in CRB amounts have been issued by the federal government since October 2020.

Since the Canada Recovery Benefit (CRB) replaced the Canada Emergency Response Benefit (CERB) just over a year ago, more than 2 million individual Canadians have applied for the CRB, a benefit which paid $900 (pre-tax) per week until July 17 of this year, and $600 (pre-tax) per week thereafter. For the most recent benefit period for which figures are available (September 12-25, 2021), 821,560 Canadians received the CRB. In total, just over $27 billion in CRB amounts have been issued by the federal government since October 2020.

It had been previously announced that the CRB program would end on Saturday October 23, 2021. While there was some speculation that the program would be wound down in a gradual way, such is not the case. On October 21, the federal government announced that the CRB would end on October 23, and that there would be no new general pandemic relief program for individuals to replace it. The government did announce that a new Canada Worker Lockdown Benefit (CWLB) would be implemented, but benefits under that program will be provided only on a localized basis, in areas where government authorities order a general lockdown for pandemic-related reasons.

Details of the new benefit are still to be announced; however, the federal government announcement made on October 21 did provide the following information. The CWLB will be

• $300 a week;
• strictly available to workers whose work interruption is a direct result of a government-imposed public health lockdown;
• available until May 7, 2022, with retroactive application to October 24, 2021 should the situation warrant it;
• accessible for the entire duration of a government-imposed public health lockdown (up until May 7, 2022);
• available to workers who are ineligible for Employment Insurance (EI) and those who are eligible for EI, as long as they are not paid benefits through EI for the same period. 

Two other individual pandemic relief programs which were also scheduled to end on October 23 have, however, been extended. The Canada Recovery Sickness Benefit (CRSB) and the Canada Recovery Caregiving Benefit (CRCB) are both extended to be available until May 7, 2022. In addition, the maximum duration of benefits under both plans has been extended.

The Canada Recovery Sickness Benefit of $500 (pre-tax) per week is available to individuals who

• are unable to work for at least 50% of the week because they contracted COVID-19, or have been advised to self-isolate for reasons related to COVID-19; or
• have underlying conditions, are undergoing treatments, or have contracted other sicknesses that, in the opinion of a medical practitioner, nurse practitioner, person in authority, or government or public health authority, would make them more susceptible to COVID-19.

The CRSB is currently available for a maximum of 4 weeks. Effective as of October 24, 2021 and until May 7, 2022, that eligibility is extended by 2 weeks, to be available for a maximum of 6 weeks.

The CRCB is provided to those who must stay home to care for an ill or vulnerable relative. The benefit of $500 (pre-tax) per week per household is applicable where an individual is unable to work for at least 50% of the week because:

• they must care for a child under the age of 12 or family member who needs supervised care, because schools, day-cares, or care facilities are closed due to COVID-19; or

• the child or family member is sick and/or required to quarantine or is at high risk of serious health implications because of COVID-19.

The CRCB was previously available for a maximum of 42 weeks. Effective as of October 23, 2021 and until May 7, 2022, that eligibility period is extended to 44 weeks.

While Canadians who are (or may become) eligible for either the Canada Sickness Recovery Benefit or the Canada Caregiving Recovery Benefit can be assured that such benefits will continue to be available for almost another seven months, current recipients of the Canada Recovery Benefit are faced with the immediate need to replace income received from that program. Those recipients should be aware that, while the program ended on October 23, 2021, applications for CRB amounts for benefit periods up to that date can still be made. Each CRB application is made for a particular two-week period, and applications for a particular period can be made up to 60 days after the end of that period. Consequently, applications for the final CRB period of October 10 to 23, 2021 can be made until December 22, 2021.

Finally, the application period for a number of prior CRB benefit periods still remain open. A listing of the benefit periods for which application can still be made, together with information on the applicable deadlines and the application process can be found on the federal government website at https://www.canada.ca/content/canadasite/en/revenue-agency/services/benefits/recovery-benefit/crb-periods-apply.html#h-2.

Information on the changes to existing individual pandemic benefit programs is available on the same website at https://www.canada.ca/en/department-finance/economic-response-plan.html#individuals.

Two quarterly newsletters have been added—one dealing with personal issues, and one dealing with corporate issues.

The ongoing pandemic has, as one of its many effects, created a boom in the home renovation industry, as Canadians find themselves needing to adapt their homes to more and more varied uses.

The ongoing pandemic has, as one of its many effects, created a boom in the home renovation industry, as Canadians find themselves needing to adapt their homes to more and more varied uses.

One of those uses is multi-generational living, as older Canadians seeks to “age in place” rather than moving to a retirement home or long-term care facility. And, while home renovations for any purpose are undoubtedly expensive, renovations done to allow homeowners (or family members of homeowners) to continue to live in the family home benefit from a federal tax credit for expenses incurred.

That credit — the Home Accessibility Tax Credit, or HATC — has three features that make it particularly useful. First, the credit is available to all taxpayers who incur eligible expenses, regardless of individual or family income. Second, expenses eligible for the credit don’t have to be incurred for the benefit only of the homeowner — taxpayers who incur eligible home renovation expenses can claim the HATC where those expenses are done to increase accessibility or safety for any family member who is over the age of 65 or who is disabled and lives in the home. Finally, the HATC is a rare exception to the general rule that an expense can only be claimed once for tax purposes. Many of the expenses which are eligible for the HATC also qualify for the medical expense tax credit — and the rules permit such eligible expenses to be claimed for purposes of both credits, in the same tax year.

The rules which govern how the credit is claimed are also quite flexible. For purposes of the credit, a “qualifying individual” is a person over the age of 65, or a person of any age who can claim the disability tax credit. An “eligible individual” is a family member on whom the qualifying individual is dependent. Under the HATC any allowable credit can be split between or among eligible and qualifying individuals as they see fit.

The credit is equal to 15% of up to $10,000 in qualifying expenses per year, and that dollar limit applies even if there is more than one qualifying individual living in the home. The credit itself is non-refundable, meaning that it can reduce federal income tax otherwise payable, but cannot create or increase a refund. Consequently, from a tax planning perspective, it makes sense for the credit to be claimed only by eligible or qualifying individuals who have tax payable for the year.

The general rule for purposes of the credit is that an eligible expense is one which is done to increase accessibility of the home or the safety of a qualifying individual living in the home. As well, any renovation done must be of a permanent or “enduring” nature — an item bought that does not become a permanent part of the home is generally not eligible. As an example, a shower seat which is permanently affixed to the wall or floor in a bath or shower would qualify for the credit, while a portable seat that can be taken in and out of the shower as needed would not.

It’s apparent that the kind and number of additions and renovations which would qualify for the credit are almost innumerable, and any of those which meet the criteria outlined above will generally qualify. There are, however, specific categories of goods and services which are not eligible for the HATC. The Canada Revenue Agency (CRA) provides a listing of common expenses which do not qualify on its website at https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/about-your-tax-return/tax-return/completing-a-tax-return/deductions-credits-expenses/line-31285-home-accessibility-expenses.html.

Most homeowners, especially where renovations are extensive, would employ professionals to make the changes. Others, however, are committed DIYers, who take on the project themselves, perhaps enlisting the help of family members. In each case, the rules on which expenses (i.e., labour and materials) qualify for the credit will differ, and those rules, as outlined on the CRA website, are as follows.

Work performed by yourself

If you do the work yourself, the eligible expenses include expenses for:

• building materials
• fixtures
• equipment rentals
• building plans
• permits

However, the value of your labour or tools cannot be claimed as eligible expenses.

Work performed by a family member

Expenses are not eligible if the goods or services are provided by a person related to the qualifying or the eligible individual, unless that person is registered for goods and services tax/harmonized sales tax (GST/HST) under the Excise Tax Act. If the particular family member is registered for GST/HST and if all other conditions are met, the expenses will be eligible for the HATC.

Work performed by professionals

Generally, paid work done by professionals such as electricians, plumbers, carpenters, and architects for eligible expenses qualifies as eligible expenses. 

Home renovations done to ensure all family members can access the home easily and live in it safely are generally renovations which must be done in a timely manner, for everyone’s safety and peace of mind. And, while costs for renovations (of any kind, for any purpose) generally end up being higher than planned, in this case, some financial assistance for those costs is provided through our tax system.

In most cases, the need to seek out and obtain legal services (and to pay for them) is associated with life’s more unwelcome occurrences and experiences — a divorce, a dispute over a family estate, or a job loss. About the only thing that mitigates the pain of paying legal fees (apart, hopefully, from a successful resolution of the problem that created the need for legal advice) would be the ability to claim a tax credit or deduction for the fees paid.

In most cases, the need to seek out and obtain legal services (and to pay for them) is associated with life’s more unwelcome occurrences and experiences — a divorce, a dispute over a family estate, or a job loss. About the only thing that mitigates the pain of paying legal fees (apart, hopefully, from a successful resolution of the problem that created the need for legal advice) would be the ability to claim a tax credit or deduction for the fees paid.

Unfortunately, while there are some circumstances in which such a deduction can be claimed, those circumstances don’t usually include the routine reasons — purchasing a home, getting a divorce, establishing custody rights, or seeking legal advice about making a will or managing a family estate — for which most Canadians incur legal fees. Generally, personal (as distinct from business-related) legal fees become deductible for most Canadian taxpayers only where they are seeking to recover amounts which they believe are owed to them, particularly where those amounts involved employment or employment-related income or, in some cases, family support obligations.

The first situation in which legal fees paid may be deductible is that of an employee seeking to collect (or to establish a right to collect) salary or wages. In all Canadian provinces and territories, employment standards laws provide that an employee who is about to lose his or her job (for reasons not involving fault on the part of the employee) is entitled to receive a specified amount of notice, or salary or wages equivalent to such notice. In many cases, however, the employee can establish a right to a period of notice (or payment in lieu) greater than the statutory minimum. The amount of notice or payment in lieu of notice which is payable can then become a matter of negotiation between the employer and its former employee, and such negotiations usually involve legal representation and consequently, legal fees. In that situation, legal fees incurred by the employee to establish a right to amounts allegedly owed by the employer are deductible by that former employee. If a court action is necessary and the Court requires the employer to reimburse its former employee for some or all of the legal fees incurred, the amount of that reimbursement must be subtracted from any deduction claimed. In other words, the former employee can claim a deduction only for legal fees which he or she was personally required to pay in order to collect wages or salary owed and for which he or she was not reimbursed.

In some situations, an employee or former employee seeks legal help in order to collect or to establish a right to collect a retiring allowance or pension benefits. In such situations, the legal fees incurred can be deducted, up to the total amount of the retiring allowance or pension income actually received for that year.

The rules covering the deduction of legal fees incurred where an employee claims amounts from an employer or former employer are relatively straightforward. The same, unfortunately, cannot be said for the rules governing the deductibility of legal fees paid in connection with family support obligations. Those rules have evolved over the past number of years in a somewhat piecemeal fashion — the current rules are as follows.

Legal fees incurred by either party in the course of negotiating a separation agreement or obtaining a divorce are not deductible. Such fees paid to establish child custody or visitation rights are similarly not deductible by either parent. As well, no fees are incurred to equalize family assets.

Where, however, one former spouse has the right to receive support payments from the other, there are circumstances in which legal fees paid in connection with that right are deductible. Specifically, legal fees paid for the following purposes will be deductible by the person receiving those support payments:

• establishing the amount of support payments from their current or former spouse or common-law partner;
• establishing the amount of support payments from the legal parent of their child (who is not their current or former spouse or common-law partner) where the support is payable under the terms of a court order;
• seeking an increase in support payments;
• defending against a reduction in support payments;
• collecting late support payments; or
• requesting that child support payments be non-taxable.

On the payment side of the support payment/receipt equation, the situation is not nearly so favourable, as a deduction for legal fees incurred will not generally be allowed to a person paying support. More specifically, as outlined on the Canada Revenue Agency (CRA) website, a payer of support “cannot deduct legal and accounting fees incurred to establish, negotiate, contest, reduce or terminate the amount of support payments”.

Finally, where the CRA reviews or challenges income amounts, deductions, or credits reported or claimed by a taxpayer for a tax year, any fees (which in this case includes accounting fees) paid for advice or assistance in dealing with the CRA’s review, assessment, or reassessment, or in objecting to that assessment or reassessment, can be deducted by the taxpayer. A deduction can similarly be claimed where the taxpayer incurs such fees in relation to a dispute involving employment insurance, the Canada Pension Plan, or the Quebec Pension Plan.

Since March of 2020, tens of millions of Canadians have received pandemic benefits. In some cases, those benefits have been received directly by individuals — typically, through the Canada Emergency Response Benefit (CERB) and, later, the Canada Recovery Benefit (CRB). In other cases, benefits have been provided to businesses, in some cases to assist them with rent payments or, in others, to subsidize employee wages.

Since March of 2020, tens of millions of Canadians have received pandemic benefits. In some cases, those benefits have been received directly by individuals — typically, through the Canada Emergency Response Benefit (CERB) and, later, the Canada Recovery Benefit (CRB). In other cases, benefits have been provided to businesses, in some cases to assist them with rent payments or, in others, to subsidize employee wages.

Each of the pandemic economic assistance programs provided has been tweaked, renewed, and extended several times, and the current status of each such benefit program can be hard to remember. What follows is a summary of the major programs which are currently (as of September 2021) in place, and the dates on which those programs are currently scheduled to come to an end. Barring any changes by the newly elected federal government, most of the following programs are scheduled to end in October 2021.

Benefit programs for individuals

Canada Recovery Benefit

The CRB replaced the initial pandemic relief program, the CERB, in September of 2020.

The CRB is an income replacement benefit paid to those who are not working due to the pandemic or who have experienced a 50% reduction in income when compared to the previous year, again for pandemic-related reasons. To receive the CRB, an individual must have earned at least $5,000 in 2019, 2020, or during the previous 12 months and must not be eligible for Employment Insurance.

The amount which can be received under the CRB program depends on when an application for the benefit is made. Individuals who apply after July 17, 2021 can receive $600 for each two-week period. Those who applied prior to July 18, 2021 can receive $1,000 each subsequent two-week period.

Under current rules, the CRB is scheduled to end on October 23, 2021. However, it is possible to apply for the CRB after that date, as the rules allow applications to be made retroactively for any two-week period up to 60 days after that period has ended.

Canada Recovery Sickness Benefit

The eligibility criteria for the Canada Recovery Sickness Benefit (CRSB) are much narrower than those for the CRB and consequently the rules are much simpler.

The CRSB is paid to those who miss more than 50% of their work week because they are sick with COVID-19, because they have been advised to self-isolate due to COVID-19 or because they have a health condition which puts them at greater risk of contracting COVID-19.

The benefit of $500 per week is paid for a maximum of four weeks, and those weeks do not have to be consecutive.

Like the CRB, the CRSB program is scheduled to end on October 23, 2021, but applications for any one-week benefit period can be made up to 60 days after the end of that benefit period.

Canada Recovery Caregiving Benefit

As the name implies, the Canada Recovery Caregiving Benefit (CRCB) can be claimed by those who are unable to work because they must care for their child under 12 years old or for a family member who needs supervised care. That need for care can arise because the family member is ill, self-isolating, or at risk of serious health complications because of COVID-19, or because their school, regular program, or facility is closed or unavailable to them for pandemic-related reasons.

The CRCB is paid as a $500-per-week benefit, for a maximum of 42 weeks. Those 42 weeks are not required to be consecutive weeks.

The CRCB program is scheduled to end on October 23, 2021, but application for the benefit can be made up to 60 days after the end of a benefit period.

It’s apparent that an individual could, under the eligibility requirements, qualify for more than one of the above benefits during the same time period. However, the rules prevent such “double-dipping”, by providing that only one such pandemic benefit can be received during for a particular time period. In addition, individuals are generally not eligible for any of the above benefits for a time period during which they were receiving Employment Insurance, short-term disability benefits, or (in the province of Quebec) Quebec Parental Insurance Benefits.

More information on each of these individual pandemic benefits can be found on the government of Canada website at https://www.canada.ca/en/services/benefits/covid19-emergency-benefits.html.

Benefits for businesses

Over the past year and a half, the federal government has provided a number of rent subsidy and wage subsidy programs to enable businesses to cover their fixed costs during lockdowns and to bring back employees once it was possible to re-open. The major current programs in those areas are as follows.

Canada Emergency Wage Subsidy

The Canada Emergency Wage Subsidy or CEWS provides a subsidy on eligible salary or wages to help businesses hire and pay workers. Under the program terms, eligible employers can hire new workers, increase workers' hours, or increase wages.

The CEWS program will continue until October 23, 2021.

Canada Recovery Hiring Program

Like the CEWS, the Canada Recovery Hiring Program (CRHP), which was introduced on June 6, 2021, provides a subsidy on eligible salary or wages to help businesses hire and pay workers. Most of the eligibility criteria under the CEWS and the CRHP are the same (although the calculation of benefits differs) and, under both programs, eligible employers can hire new workers, increase workers' hours, or increase wages.

The CRHP serves many of the same purposes as the CEWS. There is an overlap period for the two programs between June 6 and October 23, 2021, and eligible employers can in fact choose which program to apply to for any eligibility period during that overlap period. The federal government provides an online calculator to enable businesses to determine which benefit is more advantageous, and that calculator can be found at https://www.canada.ca/en/revenue-agency/services/subsidy/calculate-wage-hiring-subsidies.html.

Employers can apply for the CRHP for a four-week period, and applications for support must be made again for each subsequent four-week period. An application for a specific four-week claim period can be made up to 180 days after the end of that claim period.

Unlike some other business pandemic support programs, the CRHP is scheduled to be available until November 20, 2021.

Canada Emergency Rent Subsidy

The Canada Emergency Rent Subsidy (CERS) provides a rent and mortgage subsidy for eligible expenses to qualifying businesses, charities, and non-profits. Unlike an earlier version of the commercial tenant support program, the CERS is applied for by, and paid directly to, tenants and property owners. There is no requirement for participation by landlords.

An additional 25% in rent support is available under the CERS program for businesses which were “significantly restricted” by mandatory public health orders.

The CERS program will be available until October 23, 2021. However, eligible businesses can apply for any particular claim period up to 180 days after the end of that claim period.

The programs listed above are the main pandemic benefit programs currently available to individuals and businesses. While the purpose of each program and the benefits to be obtained are relatively straightforward, there are myriad details with respect to eligibility, application processes, determination of benefits, and tax treatment of those benefits. As well, there are many other such programs offered by the federal government. Detailed information on all such pandemic relief programs can be found on the federal government website at https://www.canada.ca/en/department-finance/economic-response-plan.html#businesses.

Finally, the information summarized above with respect to pandemic benefits is current as of September 26, 2021. Extensions of such programs, or changes to program terms may be made before the programs expire. Should that occur, information on the changes will be available on the federal government website at https://www.canada.ca/en/department-finance/economic-response-plan.html#businesses.

Most Canadians know that the deadline for making contributions to one’s registered retirement savings plan (RRSP) comes 60 days after the end of the calendar year, around the end of February. There are, however, some circumstances in which an RRSP contribution must be (or should be) made by December 31, in order to achieve the desired tax result.

Most Canadians know that the deadline for making contributions to one’s registered retirement savings plan (RRSP) comes 60 days after the end of the calendar year, around the end of February. There are, however, some circumstances in which an RRSP contribution must be (or should be) made by December 31, in order to achieve the desired tax result.

Similarly, most Canadians who have opened a registered retirement income fund (RRIF) are aware that they are required to make a withdrawal of a specified amount from that RRIF each year, with the percentage withdrawal amount based on the RRIF holder’s age — although few are aware of when and how that required withdrawal is calculated.

The rules around tax-free savings accounts (TFSAs) are more flexible, but it is nonetheless the case that advantages can be obtained (and disadvantages avoided) by carefully timing of TFSA withdrawals and recontributions based on the calendar year end.

In other words, while the basic rules with respect to contributions to and withdrawals from each of these savings plans are relatively straightforward there are, nonetheless, benefits to be received from careful consideration of the detailed rules — and some exceptions to those rules.

What follows is an outline of steps which should be considered, before the end of the 2021 calendar year, by Canadians who have an RRSP, a RRIF, and/or a TFSA.

Timing of RRSP contributions

When you are making a spousal RRSP contribution

Under Canadian tax rules, a taxpayer can make a contribution to an RRSP in his or her spouse’s name and claim the deduction for the contribution on his or her own return. When the funds are withdrawn by the spouse, the amounts are taxed as the spouse’s income, at a (presumably) lower tax rate. However, the benefit of having withdrawals taxed in the hands of the spouse is available only where the withdrawal takes place no sooner than the end of the second calendar year following the year in which the contribution is made. Therefore, where a contribution to a spousal RRSP is made in December of 2021, the contributor can claim a deduction for that contribution on his or her return for 2021. The spouse can then withdraw that amount as early as January 1, 2024 and have it taxed in his or her own hands. If the contribution isn’t made until January or February of 2022, the contributor can still claim a deduction for it on the 2021 tax return, but the amount won’t be eligible to be taxed in the spouse’s hands on withdrawal until January 1, 2025. It’s an especially important consideration for couples who are approaching retirement who may plan on withdrawing funds in the relatively near future. Even where that’s not the situation, making the contribution before the end of the calendar year will ensure maximum flexibility should an unforeseen need to withdraw funds arise.

When you are turning 71 during 2021

Every Canadian who has an RRSP must collapse that plan by the end of the year in which he or she turns 71 years of age — usually by converting the RRSP into a RRIF or by purchasing an annuity. An individual who turns 71 during the year is still entitled to make a final RRSP contribution for that year, assuming that he or she has sufficient contribution room. However, in such cases, the 60-day window for contributions after December 31 is not available. Any RRSP contribution to be made by a person who turns 71 during the year must be made by December 31 of that year. Once that deadline has passed, no further RRSP contributions are possible.

RRIF withdrawals for 2021

Under Canadian law, anyone who has a RRIF is required to make a minimum withdrawal from that RRIF each year. The amount of the withdrawal is calculated as a specified percentage of the balance in the RRIF at the beginning of the calendar year, with that percentage based on the age of the RRIF holder at that time.

Those RRIF holders who elect to withdraw only the required minimum amount each year will likely notice a significant increase in the amount which must be withdrawn (and taxed) in 2021 when compared to the required withdrawal from 2020. That difference is attributable, for the most part, not to increases in the value of the RRIF or the increased age of the RRIF holder, but to a temporary rule which was put in place in 2020 as part of the pandemic relief measures.

In March 2021, the stock market experienced a significant loss in value. Since required RRIF withdrawal amounts are based on the value of the RRIF at the start of the calendar year, many RRIF holders were faced with the prospect of having to make withdrawals from a portfolio whose value had declined precipitously since January 1, 2020. In recognition of that reality, required RRIF withdrawals for RRIF holders of all ages were reduced (for 2020 only) by 25%.

For 2021, the usual RRIF percentage withdrawal requirements have been reinstated. That fact, combined with the market recovery since March 2020, will mean that many RRIF holders may be surprised at the amount which they must withdraw from their RRIFs (and pay tax on) in 2021.

Take, for example, an individual who was 74 years old at the beginning of 2020 and had $500,000 in his or her RRIF on January 1, 2020. The required minimum withdrawal for 2020 (taking into account the 25% reduction) would have been $21,250.

Assume that the balance in the RRIF grew by 5% during 2020 and that the RRIF balance was therefore $525,000 on January 1, 2021. The RRIF holder (aged 75 as of January 1, 2021) will be required to withdraw a minimum of $30,555 from that RRIF for 2021, and to pay tax on that amount.

While there is no way of avoiding the requirement to withdraw a minimum amount from one’s RRIF, and to pay tax on the amount withdrawn, taxpayers who do not have immediate need of such funds can consider contributing those amounts to a TFSA. Where that is done, the funds can be invested and continue to grow, and neither the original contribution nor the investment gains will be taxable when the funds are withdrawn from the TFSA.

Planning for TFSA withdrawals and contributions

Each Canadian aged 18 and over can make an annual contribution to a TFSA — the maximum contribution for 2021 is $6,000. As well, where an amount previously contributed to a TFSA is withdrawn from the plan, that withdrawn amount can be re-contributed, but not until the year following the year of withdrawal.

Consequently, it makes sense, where a TFSA withdrawal is planned (or the need to make such a withdrawal might arise) within the next few months to make that withdrawal before the end of the calendar year. A taxpayer who withdraws funds from his or her TFSA before December 31, 2021 will have the amount which is withdrawn added to his or her TFSA contribution limit for 2022, which means it can be re-contributed, where finances allow, as early as January 1, 2022. If the same taxpayer waits until January of 2022 to make the withdrawal, he or she won’t be eligible to replace the funds withdrawn until 2023.

The approach of the calendar year end doesn’t usually prompt Canadians to consider the details of making contributions to an RRSP or withdrawals from a TFSA or a RRIF. There is, however, no flexibility in the deadlines for taking such actions, and considering what steps may be needed or advisable now means one less thing to remember as the December 31 deadline nears.