2013 brings tax changes
Tax changes that impact TFSAs, RRSPs, CPP and more
By: Vincent Lo
1. Thou shalt e-file certain tax returns.
- According to the Canada Revenue Agency (CRA), approximately 95% of Canadians are eligible to e-file their personal tax returns (T1). The CRA recently noted that two thirds of Canadians filed their 2011 T1 electronically.
- All 2012 income tax returns filed by paid tax preparers who do more than 10 income tax returns per year must be filed electronically (e-file).
- With limited exceptions, this new requirement applies to T1 income tax returns as well as corporate tax returns (T2).
- There are potential penalties for tax preparers who fail to meet the mandatory e-filing requirement.
- In the context of the T1, there are certain returns that cannot be e-filed. These include the following:
- Taxpayers with multijurisdictional income.
- Taxpayers who are immigrants, emigrants, or non-residents of Canada.
2. New contribution limit for tax-free savings accounts (TFSAs).
- Effective 2013, the annual TFSA contribution limit is increased to $5,500 (from $5,000 since its introduction in 2009).
3. New contribution limit for registered retirement savings accounts (RRSPs).
- The 2013 RRSP contribution limit is increased to $23,820 (from $22,970 in 2012).
4. Automobile deductions and benefits – the corresponding amounts for 2012 are noted below if they differ from the respective 2013 amounts.
- Maximum capital cost of passenger vehicles (purchased in 2013) for capital cost allowance purposes: $30,000 plus applicable federal and provincial sales taxes.
- Limit on deductible leasing costs for passenger vehicles (leased in 2013): $800 per month plus applicable federal and provincial sales taxes.
- Maximum allowable interest deduction for amounts borrowed to purchase an automobile in 2013: $300 per month.
- Limit on the deduction of tax-exempt allowances paid by employers to employees using their personal vehicle for business purposes for 2013: 54 cents (53 cents for 2012) per kilometer for the first 5,000 kilometers and 48 cents (47 cents for 2012) for each additional kilometer. For Yukon, the Northwest Territories and Nunavut, the tax-exempt allowance is set four cents higher.
- The general prescribed rate used to determine the taxable benefit relating to the personal portion of automobile operating expenses paid by employers: 27 cents (26 cents for 2012) per kilometer. The corresponding rate for taxpayers employed principally in selling or leasing automobiles: 24 cents (23 cents for 2012) per kilometer.
5. New maximum Canada Pension Plan (CPP) contribution limit and Employment Insurance (EI) premium for 2013.
- Maximum CPP contribution limit: $2,356.20 ($2,307 for 2012) for each of the employer and the employee.
- Maximum EI premium: $1,247.57 ($1,176 for 2012) and $891.12 ($840 for 2012) for the employer and the employee respectively.
6. Prescribed Federal interest rates for first quarter of 2013 – these rates have not changed since the second quarter of 2009.
- For overdue taxes, CPP contributions and EI premiums: 5%
- For non-corporate taxpayer overpayments: 3%
- For corporate taxpayer overpayments, calculation of taxable benefits for employees and shareholders for certain loans: 1%
7. 2012 T3/T4/T5 deadlines:
- There have not been any changes.
- 2012 T4 and T5 forms will be due by end of February 2013.
- 2012 T3 forms will be due by end of March 2013 (90 days after the 2012 calendar year end).
Vincent Lo is a tax senior manager of our Private Company Services practice in Vancouver. He has deep technical skills and extensive experience in areas of Canadian-controlled private corporations, corporate reorganizations, trusts, partnerships, and succession and estate planning.