Tuesday marked an auspicious day for tax professionals as it was the release date of the highly anticipated and totally redesigned T1 Personal Income Tax return that we’ll be using to file our taxes for the 2019 tax year.
Lest it catch you by surprise, here’s a primer on what’s changed on the 2019 T1 return.
As the Canada Revenue Agency put it, “Your income tax package has a new look.” No kidding! Some of the changes include the use of plain language, “where possible,” an increased font size and more white space.
The new tax return (ignoring any schedules) has doubled in size to eight pages for 2019 from four pages in prior years. While you might think that this is solely due to the ever-increasing complexity of our tax code, it’s actually because the CRA has decided to include the calculation of federal tax itself as part of the return. (It used to be calculated separately on Schedule 1, which has been retired, along with its companion worksheet).
Page one of the return still asks for basic identification information, such as your name, address, e-mail address, province of residency, marital status and information about your spouse or partner.
The second page is now divided into three parts. The top part is the information for Elections Canada so you can be included on the list of electors for an upcoming election. (Given the current minority federal government, this information may come in handy sooner than usual.) The middle section is new and asks whether you have any income that is exempt under the Indian Act. If you tick off the box, you are instructed to complete a new form, the T90, “Income Exempt under the Indian Act.” The bottom of page two is where you indicate whether you owned any foreign investment property (excluding foreign property in registered accounts) in 2019 where the total cost amount was more than $100,000 at any time last year. If so, you are directed to complete Form T1135, “Foreign Income Verification Statement.”
Moving on to page three, that’s where we start to calculate our total income. The first thing you’ll notice is that for 2019 (and future tax years), some of the line numbers that were previously 3 and 4 digits are now 5 digits. For example, employment income used to be reported on Line 101. That line has now been renumbered as Line 10100. Total income, which used to be Line 150 is now Line 15000.
Page four is dedicated to the calculation of net income. This is the page on which you tabulate the various deductions for such things as your RRSP deduction (Line 20800), child-care expenses (Line 21400) and tax-deductible interest expense (Line 22100), to name just a few. Net income, now totalled on Line 23400, is a very important number as it’s used to calculate a variety of income-tested benefits and credits. For example, if your 2019 net income was more than $77,580, part (or all) of your Old Age Security pension will be reduced.
The next page, page five, is reserved for the calculation of taxable income. At first glance, it seems as if the CRA must have forgotten something as the nine deductions on page five, such as losses carried forward from other years, take up about only about a third of the page. The rest is empty, white space.
Pages six and seven calculate federal tax and have replaced the Schedule 1. Page six calculates the various federal non-refundable tax credits available, from the basic personal amount ($12,069 for 2019) on line 30000 which every Canadian gets, to the lesser-known credits, such as the volunteer firefighters’ amount on Line 31220. Most of the federal non-refundable credits other than the donation credit (which is higher for gifts over $200 in a year) are at a rate of 15 per cent.
Page seven calculates your federal tax, starting with the five federal tax brackets in 2019, ranging from 15 per cent for 2019 income up to $47,630 all the way up to 33 per cent for income over $210,371. The non-refundable credits calculated on page six are deducted, along with various other credits like the dividend tax credit and the foreign tax credit, to arrive at net federal tax on Line 42000. Non-Quebecers still need to complete Form 428 for your province or territory of residence to calculate your provincial or territorial tax. (Residents of Quebec must fill out and complete the Quebec personal tax return.)
Finally, page eight is used to calculate any refund or balance owing and includes the Climate Action Incentive, if you were a resident of Alberta, Saskatchewan, Manitoba or Ontario (You need to complete Schedule 14).
If you owe money on your tax return, which is pretty rare given that last year only 16 per cent of the 30 million personal tax returns filed for 2018 owed anything to the CRA, you can now pay your balance owing using a credit card, PayPal, or Interac e-Transfer through a third-party service provider. For more information, go to Payments to the Canada Revenue Agency on the government’s website.
The general deadline for filing your 2019 tax return is April 30, 2020 but if you’re self-employed or have a spouse or a common-law partner who is self-employed, the filing deadline is extended to June 15, 2020, but any taxes owing must still be paid by April 30, 2020.
While it’s still too early to file your return, you can get prepared for tax season by making sure you have a CRA My Account if you wish to take advantage of the CRA’s Auto-fill my return feature. If you file your own return using tax software, the CRA’s NETFILE service will re-open on Monday, Feb. 24, 2020.