Personal Tax

The given name of Tax Free Savings Account is a bit of a misleading title. It is a registered tax-advantaged savings account. Unlike, a regular investment account where you have to pay tax on the interest/dividends/capital gains you earn, a registered Tax-Free Savings Account (TFSA), is where any income you earn is non-taxable. Think of it as an investment holding account to store things like exchange-traded funds (ETFs), guaranteed investment certificates (GICs), bonds, stocks and, yes, plain-old cash.

While you do have to follow by the set amount of contribution room each year, any gains you earn on those investments will not affect your contribution room for the current year or years to come. Any resident of Canada, over the age of 18, with a valid social insurance number can open a TFSA.

How much can I contribute to my TFSA?

The TFSA contribution limit for 2022 is $6,000, if you turned 18 before the year 2009, your maximum lifetime TFSA contribution limit will be $81,500. If you take money out of your TFSA, you get that room back on January 1 the following year. Just don’t go over your limit.

Year Annual TFSA Contribution Limit
2009 $5,000
2010 $5,000
2011 $5,000
2012 $5,000
2013 $5,500
2014 $5,500
2015 $10,000
2016 $5,500
2017 $5,500
2018 $5,500
2019 $6,000
2020 $6,000
2021 $6,000
2022 $6,000
Total Contribution Room for 2009-2022:  $81,500

How to check your TFSA contribution room

Here are two ways that you can calculate your annual TFSA dollar limit.

  1. If you turned 18 in a year after 2009, check out the maximum annual contribution limits either above in our chart or on the CRA’s site.
    1.1. Then add together the maximum contributions from the year you turned 18 up to the present.
    1.2. If you made a withdrawal from your TFSA in the previous year, add that amount as well.
    1.3. Subtract the total of all prior years’ contributions from that number.
    1.4. And voila! This total is your current maximum contribution.
  2. Canada Revenue Agency (‘CRA’) tracks your contribution room. You can log on to the CRA’s site or via their app.
    2.1. Go to the CRA My Account login
    2.2. Login with your preferred method. Note: If you’ve set up your bank as a sign-in partner, this is the simplest way to access your CRA account.
    2.3. Under the tabbed header, navigate to “RRSP and TFSA”
    2.4. Click “Tax-Free Savings Account (TFSA)”
    2.5. Click “Contribution Room”
    2.6. Click “Next” at the disclaimer
    2.7. Look for ‘2021 TFSA contribution room on January 1, 2021’ or ‘2022 TFSA contribution room on January 1, 2022’ This value is your most accurate contribution room since the date. Any contributions or withdrawals for the current year will not be included in this amount.
  3. You can also get your maximum contribution by phoning CRA’s Tax Information Phone Service: 1-800-267-6999. Remember to be patient if you are on hold for a while! Also, keep in mind that this amount may not reflect any contributions you’ve made from January 1 onward.
Unused TFSA contribution room to date + total withdrawal made this year + next year’s TFSA’s contribution limit =TFSA contribution room at the beginning of next year.

Are you one of the individuals who has multiple TFSAs?

Remember that your combined contributions to all of them cannot exceed your available contribution room for the current year.

If you have deposited or withdrawn money from your TFSA, it can take time for the transactions to be reported. If you check in mid to late February, this will allow time for your financial institution to report all your transactions (deposits and withdrawals) from the previous year. Ideally, keep track of those transactions yourself to ensure you don’t over-contribute.

What happens if I can’t max out my contributions?

If you can’t contribute the maximum allowable in a given year, you can catch up in the future. Unused contribution amounts can be carried forward indefinitely and used in subsequent years.
In 2022, you have $6,000 to contribute to your TFSA in addition to any unused contribution room from previous years.

Withdrawals can be re-contributed

Tax Free Savings Accounts are very flexible. If you need money, you can withdraw funds any time and the amounts withdrawn in a given year are added back to your contribution room for the next year.

For example, you can make a withdrawal in December of 2022, then re-contribute that same amount in January 2023.

Over-contribution penalty

Did you know that there is a penalty if you accidentally contribute more than your allowable limit? In that case, a tax equal to 1% of the highest excess TFSA amount in the month will be applied for each month that you are in an excess contribution position.

For example, if you contribute $2000, you pay $20 (1%) per month until you remove the over-contribution amount.

Before you get your pitchfork out against CRA employees, you will receive a letter in the first instance of an over-contribution. This will allow you to withdraw the excess amount prior to receiving a penalty.

If this sounds overwhelming, don’t worry – Richardson Miller LLP is in your corner. Give us a call and we can help you get set up.

We’re happy to answer your questions, clear up any confusion and get you on the right path. Having clean, up-to-date books will make tax time so much easier for you!

Richardson Miller LLP is here to keep you on track and ensure that your taxes and accounting needs are met. Contact us today!

What is that saying? The only two things certain in life are death and taxes. I cannot say for sure if these are the only two things certain in life but they definitely are certainties.

How to navigate death and taxes

When a taxpayer dies, there is work to be on the personal tax side of things and depending on the situation, there could be a lot of work to be done. It can be quite daunting for the Executor of the estate to deal with these final taxes as often this is not their area of expertise. So where to start?

Communicate with the government and other authorities

In my experience, most funeral homes are very helpful with this step of the process. But, just in case, it is important for the Executor to communicate with the government as soon as possible. You will need to let Canada Revenue Agency (CRA) know that the taxpayer has passed away. CRA has some handy information on their website about What to do following a death.

You may also have to communicate the death with other government departments if the taxpayer was receiving benefits such as: CPP, OAS, GIS, AISH, etc. Now is also the time to communicate with the bank, investment advisors, life insurance companies and pension providers.

And don’t forget to apply for the CPP Death Benefit now.

Retain professional assistance

There are two professionals that can be imperative when dealing with wills and estates: a lawyer and a Chartered Professional Accountant (CPA). These professionals can provide great assistance to you through the process.

Since I am a CPA, not a lawyer, I will only focus on the tax side of things and will leave the legal side to the lawyers. A CPA well versed in dealing with estate files can guide you through the process and alleviate some of the stress and confusion for you.

It is ideal to talk to a CPA in advance of the infamous April 30th personal income tax deadline. (The filing deadline for a deceased taxpayer may not even be April 30th as it depends on when in the year they pass away.) Getting authorization with CRA on a deceased taxpayer’s account takes a bit of time so this is something that you would want to have done in advance. Also, now is a good time for a CPA to get to know the file and can start to guide you on what sort of paperwork they will need.

Be patient

Some final personal income tax returns can be very simple while others can be very complex so patience may often be required. The Executor may have to do a lot of digging to find past income tax returns and to determine where all the assets are even held.

So… what is simple and what is complex?


The level of complexity will depend on what they owned, their marital status and what is detailed in their will. When a taxpayer dies, they are deemed to have disposed of all capital property they owned on the date of death and some of these dispositions may have tax implications. If the deceased has a surviving spouse that is the sole beneficiary of their estate, then that personal income tax return will be less complex. The Income Tax Act has a spousal roll-over provision which allows for all the deceased taxpayer’s assets to roll-over tax free to their spouse on their death. In cases like these, there is often only a need to file that final personal income tax return.

Not so simple

When a taxpayer has no surviving spouse, this can get more complex and can take a lot longer to settle the estate. There is still the need for that final personal income tax return that may report some taxable income on certain deemed dispositions. Some of the more common items are: RRSPs, pension payouts, real estate holdings and non-registered investments, to list just a few.

Often these assets can take some time after death to be sold or converted into cash. When this happens, there is now an Estate created. An Estate essentially is the mechanism for holding those assets from the time of death until the time they can be paid out to the beneficiaries. Once this happens, there is now an annual filing obligation of a T3 Trust Return with CRA. The year-end for these returns will be the anniversary of the date of death.

Once you have received all Notices of Assessments from CRA for all the returns filed then you can apply for a Clearance Certificate. This Certificate is CRA’s stamp of approval that there are no outstanding tax issues for the taxpayer. This one little piece of paper is very important for an Executor to have before they fully distribute the estate assets to the beneficiaries.

If you do not get a clearance certificate and distribute the assets of the estate, you may be personally liable for any tax owed by the deceased, to the extent of the value of the assets distributed. An Executor may not even be a beneficiary of an estate and could still have potential liability for the deceased taxpayer’s taxes if they do not get this Clearance Certificate.

Even more complex

Sometimes terminal income tax returns can have even more levels of complexity. Here are a few other items that add extra layers to these final tax returns:

  • Taxpayer is behind on filing personal tax returns
  • Taxpayer owned farmland or fishing property
  • Taxpayer owned shares of a small business
  • Potential for optional returns
  • Capital losses incurred
  • Estate donations – those donations made by will or designated donations
  • Foreign property owned

As you can see, there can be a lot more involved in the preparation of these final income taxes. At Richardson Miller LLP, we have seen a very wide array of estate files and we would be happy to help you through this process.

Medical benefits can be a great way to provide additional non-taxable compensation to your employees. There are many different plans available to even small and medium businesses. Whether you’ve got a health spending account or a medical insurance plan (or a combination of the two), there is a process to ensure that these medical expenses are deductible for the corporation and non-taxable for your employees.

Here are some of the typical medical benefit mistakes made by Canadian entrepreneurs that I’ve seen:

  1. Paying the medical expense directly from the company bank account.
    • Paying your dentist or chiropractor from your company bank account may seem like an efficient way to create a medical benefit plan. Unfortunately, Canada Revenue Agency would consider these expenses personal in nature and not deductible on your corporate tax return. Your medical expenses need to run through some sort of third-party insurance provider so that you can get that write off.
  2. Paying yourself only a dividend.
    • For many owner-managers, the rising CPP rates have made a dividend only compensation strategy very tempting. But guess what! If you’re not paying yourself some sort of wage, you’re not technically an employee of your company. It’s pretty difficult to access these non-taxable employee benefits when you are NOT an employee. The message here: make sure you’ve got at least SOMETHING to report on a T4 as a wage or your medical benefits will not qualify as a corporate deduction for tax purposes.
  3. Not implementing a medical benefits plan for your employees.
    • A common misconception is that you need several staff in order for a medical plan to be feasible. It is possible to implement a medical plan if there is only one employee… that one employee can even be the owner/manager. A health spending plan can be a great solution to pay for those medical expenses with company dollars.

If you are interested in expensing your medical benefits through your corporation or offering your employees an added tax-free perk, talk to a qualified, experienced benefits consultant. Talk to your trusted Chartered Professional Accountant to further ensure these medical benefits are treated properly for tax purposes.

Are you looking for a qualified, experienced Chartered Professional Accountant? Give us a call. We’re happy to help.

I have often heard from entrepreneurs that it is difficult to obtain a mortgage to buy a home. Business owners can be viewed as a higher risk than the typical employee. As a result, obtaining financing at a preferred mortgage rate is challenging.

Here is a list of my favourite mistakes to avoid:

1. Failing to Plan Ahead

There are many factors to consider when you’re buying a house. You’ll need to coordinate your corporate tax plan, your personal income levels to qualify for a mortgage as well as your personal tax situation. Failing to plan can lead to painful tax bills and less than ideal mortgage arrangements.

2. Not Paying Yourself Enough

Let’s be honest. A huge benefit of being incorporated is having the ability to keep your personal income low and defer that personal tax bill. Many entrepreneurs pay themselves only what they need to live on. If you’re planning a significant purchase of a new home, that previous personal income may not be high enough to qualify for a mortgage on the home that you want. Consider what your income needs to be in order to afford that home you’re hoping to purchase.

3. Paying Yourself Too Much

Perhaps you’ve opted to inflate your personal income because you wanted it to be high enough to qualify for a mortgage. You report a giant dividend from your company that resulted in a large deficit in the equity section of your balance sheet. Sadly, your mortgage broker is going to see that you’ve declared income that you actually didn’t have and you aren’t going to get that mortgage.

4. Giant Spikes in Draws from Your Corporation

You’ve paid yourself a minimal salary and all of a sudden, you need to draw substantially more to be able to pay the down payment for your house. You’ve typically paid yourself $60,000 annually but suddenly need $250,000. This giant spike may put you in the most unfavorable personal tax brackets when you were barely utilizing the pleasant brackets in previous years. For tax purposes, you’re far better off smoothing out the personal draws over a number of years. In this example, take $155,000 each year instead of $60,000 then $250,000.

5. Failing to Pay Yourself Consistently

Dividends or a salary doesn’t really make a huge difference in the mortgage realm as long as you’re relatively consistent about your compensation plan.

6. Not Participating in the Home Buyers Plan

If neither you nor your spouse have lived in a home that you’ve owned in the last four years, you may qualify to use your RRSPs under the Homes Buyers Plan (HBP) as part of your down payment. After March 2019, CRA allows you to withdraw up to $35,000 for your down payment. Be sure to check out the CRA website for the latest criteria and rules around this program. Don’t have $35,000 in your RRSP yet? Bump up your wage from your corporation and make a contribution to your RRSPs. Have this money sit in your RRSP account for at least 90 days before you withdraw it under the HBP in order to get the deduction on your personal tax return.

7. Not Filing your Personal Taxes

Your mortgage broker will need a copy of your personal tax return along with your Notice of Assessment. Not having this paperwork readily available can delay approval of your financing and potentially cost you your dream home.

8. Not Paying Your Personal Taxes

Your mortgage broker will require proof that your personal taxes have been paid as part of your mortgage application. If you’ve paid yourself a giant dividend from your corporation in order to get that income high enough to get the mortgage but now can’t afford the personal taxes on the dividend—you’re still not getting your mortgage.

9. Not Hiring a Qualified and Experienced Mortgage broker

Not all lenders are the same. As an entrepreneur, you have unique circumstances that take a specific skill set to fully understand. Example: My client is an owner of a successful trucking operation. He wanted to buy a vacation property and the mortgage representative at his bank was not cooperating. I supplied my client with a list of my top mortgage brokers and he had his financing arranged within the week.

Do you need help creating a corporate plan with homeownership in mind? We’re happy to help!

It’s everyone’s favourite time of year – Tax Time! This is the time of year where you get to enjoy putting together your documents and filing tax returns! Or if you are a client of Richardson Miller LLP, we do the heavy filling for you. For those who contribute to their RRSPs, the deadline is approaching to make a final RRSP contribution to reduce your 2020 taxes.

RRSP contributions vs TFSA contributions

Registered retirement savings plans (RRSP) and tax-free savings accounts (TFSA) are tax-efficient investment vehicles, and depending on your situation each can have their respective benefits.

How does an RRSP (Registered Retirement Savings Plans) work?

  1. Pre-tax money is contributed (contributions result in tax deduction).
  2. Income and gains accumulate tax-free until the money is withdrawn.
  3. Withdrawals are taxed at your marginal tax rate.
  4. Maximize tax savings with a high marginal tax rate today when you contribute and a lower marginal tax rate when you withdraw the funds in the future.

NOTE – If you make an early RRSP withdrawal: You pay a withholding tax: The withholding tax varies depending on the amount withdrawn and your province of residence. You pay income tax on early withdrawals. Make sure that they are reported on your tax return as income.

RRSP Deadline Tips:

What is the 2020 contribution deadline?

  • March 1, 2021

What is the 2020 contribution limit?

  • 18% of your 2019 earned income (up to a maximum $27,230). You are also able to contribute any unused contribution room from previous years.

How long can you contribute?

  • You have until the end of the calendar year in which you turn 71.

How does a TFSA (Tax-Free Savings Accounts) work?

  1. No deduction for tax purposes – after-tax money is contributed.
  2. All income and gains earned in a TFSA account accumulate tax-free.
  3. There is no taxation on withdrawals.

Does the TFSA have a contribution deadline?

Unlike the RRSPs annual deadline for tax purposes, the TFSA doesn’t have one. You can contribute throughout the year based on the contribution room that you have accumulated over the years.

What is the contribution limit for 2021?

The limit for 2021 is $6,000. You are also able to contribute any unused contribution room from previous years.
Never contributed to your TFSA? As of this year, the total cumulative contribution room is now $75,500 (since the TFSA first began in 2009)!

Your annual tax return doesn’t need to be overwhelming. Richardson Miller LLP is here to help you determine whether an RRSP or TFSA is more beneficial and ensure that your taxes and accounting needs are met. Contact us today!