COVID-19 Economic Response Plan – Tax Changes
Last week, the Government of Canada announced Canada’s COVID-19 Economic Response Plan, designed to support individuals and businesses. The plan offers benefits for a wide variety of people and situations. Below is a summary of the benefits we are feel are most likely to impact our clients.
2020 Income Tax Changes – Extra time to file and pay income taxes
The government is providing more time for individuals to file their personal income tax returns. The revised filing deadline is now June 1, 2020 which gives Canadians an extra month to file. For self-employed individuals, the filing deadline remains June 15, 2020. The deadline for paying taxes owed has been extended even further. Typically, balances owing are due on the filing deadline (April 30, 2020) but the government has extended the payment deadline to August 31, 2020. In order to keep money in the pockets of Canadians during a time of uncertainty, no interest or penalties will be charged on amounts that became payable between March 18, 2020 and August 31, 2020. Taxpayers who are required to make quarterly installments are also being offered relief. Installments that are generally due in March and June can now be deferred until August 31, 2020 without accumulating interest or penalties. Canadians eligible for GST credits or the Canada Child Benefit are being encouraged by the government to NOT delay filing their returns so that the 2020-2021 benefits can be calculated and updated for the July 2020 payment. In order to reduce contact and encourage social distancing, the CRA is temporarily recognizing electronic signatures for T183 forms. Taxpayers are required to sign T183 forms in order to authorize accountants and other tax preparers to file their tax returns.
If you are expecting a tax refund or other benefits, we recommend you file by April 30, especially if you can file your own returns at home and avoid an in-person interaction with your tax preparer. If you are expecting to pay a tax bill there is no harm in delaying your 2019 income tax filing and payment.
2020 Withdrawals from Registered Retirement Income Funds – 25% reduction available
To give seniors the flexibility to keep more of their assets invested, the government has reduced the required minimum withdrawal from RRIF accounts by 25% for 2020. This will allow seniors to reduce portfolio withdrawals through a negative market, hopefully allowing their portfolios to recover more quickly from the decline we’ve seen over the last few weeks.
If your current RRIF payments aren’t needed to cover your living expenses, then reducing or delaying the withdrawal should be considered to avoid liquidating assets at lower valuations. We believe that this reduction will also apply to Locked-in Income funds (LIF) accounts but are currently waiting on further confirmation. Please contact Alitis to discuss the best strategy for your situation to determine if reducing or pausing your payments is the best way to take advantage of this benefit.
We are available
If you have any questions regarding the above government initiatives or want to discuss how they may affect your personal situation, our Wealth Management Team continues to be available to our clients. We can be reached by email or by phoning 250-287-4933 or 1-800-667-2554.