TORONTO — This is the time of year when procrastinators begin to fret about filing their income tax forms with Canada Revenue Agency by April 30.
Of course, there are many reasons to file on time — such as avoiding expensive late fees and receiving tax refunds promptly.
For retired people, the CRA has an extra reason to finish their taxes on time — the potential to boost their monthly income or, on the flip side, to avoid a reduction in government payments.
That’s because the federal tax collector checks seniors’ returns to see if they’re receiving old age security (OAS) and eligible for a guaranteed income supplement (GIS).
Employment and Social Development Canada estimates 10 per cent of eligible seniors didn’t receive their GIS payments in 2016-17, the most recent information available.
Since then, the government has attempted to increase public awareness and reduce missed opportunities.
Elizabeth Mulholland, chief executive of Prosper Canada — a national charity dedicated to helping Canadians living in poverty — says GIS payments may be small but they can make a big difference.
“For seniors who are quite low-income, it’s an important additional source of income,” Mulholland says.
For the poorest seniors with virtually no income besides the OAS, the guaranteed income supplement could be worth up to a maximum of $898 a month for single people and up to $540 per person for couples.
That would be in addition to old age security (OAS), which is available to seniors aged 65 and older. OAS is currently worth about $600 a month per person for most people who meet Canadian residency requirements.
The GIS payments are reduced bit-by-bit for seniors who have other income and they’re eliminated for single people who have annual income of about $18,240 or more and couples with annual income of about $24,550 or more.
Mulholland says the CRA’s automatic applications ensure more people receive all the benefits they are owed.
“We know that the more steps that you put in a process, the more likely it is that people are going to encounter obstacles . . . and not succeed in completing the process.”
There’s an important catch, however. Just because a senior receives GIS in a taxation year — shortly after they begin receiving OAS for the first time, for example — doesn’t mean they don’t have to file annually with the CRA.
“If you don’t file your taxes, the government doesn’t know what your income is that year, Mulholland says.
“In the absence of you filing, their assumption is you don’t need this benefit any more. So they’ll cut it off.”
Employment and Social Development Canada, which oversees the GIS, OAS and other benefits, says clients should contact Service Canada by phone or in-person as soon as possible if the tax return can’t be filed by April 30.
“This will allow the department to be in a position by June 2019 to reassess a client’s GIS entitlement for July 2019 to June 2020,” ESDC said in an emailed statement.
Mulholland adds there are many reasons people could need assistance with filing their taxes and suggests they or their family or friends check for local organizations that operate volunteer-staffed tax clinics.
“If you need help, reach out,” she says. “All of these pots of money add up, when you put them together. So it’s important to make sure people are getting all of them.”
Kelley Keehn, an author of several financial advice books and an advocate for the Financial Planning Standards Council, says it’s also important to start planning years before retirement in order to avoid unnecessary benefit clawbacks.
“If you aren’t pre-planning … you’re probably going to pay more tax than you need to and you may lose out on government benefits,” Keehn says.
Your post-retirement income might include not only OAS and GIS but also Canada Pension Plan payments, a company pension plan, a locked-in retirement account or a spouse’s benefits.
“You take all of those elements together and you can see how it gets to be a little bit complex,” Keehn says.
To avoid unnecessary clawbacks of income-linked benefits, Keehn says it’s often better to use a registered retirement income fund (RRIF) to spread out withdrawals and create a predictable flow of income at an appropriate level.
The Canada Revenue Agency, Financial Planning Council of Canada and many chartered banks provide various online tools and video tutorials that can assist with the process.
But Keehn says many Canadians probably need to get professional advice about whether to begin RRIF withdrawals earlier than age 71 (the latest allowed) and how to factor in widowed spouses and other estate beneficiaries.
Mulholland notes there are times when a senior’s income does rise above poverty levels — through an inheritance or marriage, or other source of income — and that may also disqualify them for some retirement benefits such as the GIS.
“Life happens to all of us in good ways and bad,” she says. “And the Canada Revenue Agency’s job is to make sure you get all the money you’re entitled to — but not get money you’re not entitled to.
David Paddon, The Canadian Press
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