This major TaxCycle release extends Canada Revenue Agency (CRA) and Alberta certification for filing T2 and AT1 returns with corporate year ends up to May 31, 2019. (Québec CO-17 continues to support tax years ending in 2016 up to May 31, 2019). We are also excited to add the new form section navigator to all TaxCycle modules.
TaxCycle is certified for the preparation and filing of federal T2 and Alberta AT1 corporate tax returns with tax year ends up until May 31, 2019. (For Québec CO-17 returns, TaxCycle continues to support year ends ending in 2016 up to May 31, 2019.)
This release adds a new form section navigator to the bottom of the Prepare sidebar. This navigator allows you to jump to a specific section in the form currently open on screen.
See the new form section navigator in action at [2m46s] of the What's New in TaxCycle presentation recorded at this fall's online conference.
To access the form section navigator:
The following forms have been updated in this release. (Changes are minor unless more detail provided.)
Removed the country code “CAN” from:
Prevented negative amounts from being entered in income column in:
This release adds the new CRA T2 pre-validation service:
TaxCycle T2 contains a Pre-Validation worksheet that lists the data transmitted to the CRA when you use this new service. To use the service:
To file an amended AT1 return, answer Yes to the related question in the Alberta AT1 section on the Info worksheet and re-transmit the return. Note that an AT1 return can only be amended electronically after November 30, 2018. If you try to file an amended AT1 return before November 30, an error message in TaxCycle will prevent you from electronically transmitting the amended AT1 return.
In all TaxCycle modules, the RC59PhoneOrMail form is now called RC59OfflineConsent to agree with the CRA form name change.
The 2018 federal budget included measures that change how small businesses with significant investment income access the small business tax credit.
Under these new rules, if a corporation and its associated corporations earn more than $50,000 of passive investment income in a given year, the amount of income eligible for the small business tax rate is gradually reduced. The small business deduction limit is reduced by $5 for every $1 of investment income above the $50,000 threshold (equivalent to $1 million in passive investment assets at a 5-per-cent return), such that the business limit would be reduced to zero at $150,000 of investment income (equivalent to $3 million in passive investment assets at a 5-per-cent return). This change applies to taxation years that begin after 2018.
For the purpose of determining the reduction of the business limit of a CCPC, investment income will be measured by a new concept of “adjusted aggregate investment income” which will be based on “aggregate investment income” (a concept that is currently used in computing the amount of refundable taxes in respect of a CCPC’s investment income) with certain adjustments. Consistent with existing rules relating to aggregate investment income, adjusted aggregate investment income will not include income that is incidental to an active business.
For more details of this change, please refer to pages 17 to 22 of the Tax Measures: Supplementary Information budget document
On Schedule 7, a new Part 1.1 has been added to calculate the adjusted aggregate investment income.
Enter adjusted aggregate investment income (AAII) for associated corporations in the new column 9 in the Schedule 23 section of the CGI worksheet.
The business limit reduction under this measure will operate alongside the business limit reduction that applies in respect of taxable capital in excess of $10 million. The reduction in a corporation’s business limit will be the greater of the reduction under this measure and the existing reduction based on taxable capital. On page 4 of T2 jacket, a new calculation has been added to calculate the small business limit reduction.
For Alberta, on the AT1 Schedule 1 (AS1), a line has been added and line D description has been adjusted to accommodate this measure:
The federal Budget 2018 also introduced a measure that limits access to refundable taxes on the distribution of certain dividends. This change applies to taxation years that begin after 2018. (For more details of this change, please refer to pages 17 to 22 of the Tax Measures: Supplementary Information budget document.)
To support this measure, the budget proposed creating a new Refundable dividend tax on hand (RDTOH) account. This new account (eligible RDTOH) will track refundable taxes paid under Part IV of the Income Tax Act on eligible portfolio dividends. Any taxable dividend (i.e. eligible or non-eligible) will entitle the corporation to a refund from its eligible RDTOH account.
The current RDTOH account (which will now be referred to as non-eligible RDTOH) will track refundable taxes paid under Part I of the Income Tax Act on investment income as well as under Part IV on non-eligible portfolio dividends (i.e. dividends that are paid by non-connected corporations as non-eligible dividends). Refunds from this account will be obtained only upon the payment of non-eligible dividends.
Upon the payment of a non-eligible dividend, a private corporation will be required to obtain a refund from its non-eligible RDTOH account before it obtains a refund from its eligible RDTOH account.
For the first taxation year that begins after 2018, a transitional rule will apply to allocate the existing RDTOH balance. To allocate the balances under this transitional rule, TaxCycle T2 contains a new worksheet called RDTOHTransitionalWS. The new RDTOHWS worksheet keeps track of eligible and non-eligible RDTOH subsequent to the first taxation year that begins after 2018.
On November 15, 2018, the Ontario Economic Outlook and Fiscal Review was presented. In that announcement, the following measures previously announced in the March 28, 2018 Ontario budget are being eliminated.
Small business limit reductions from passive income for tax years starting in 2019 or later
The 2018 March Ontario budget proposed to adopt the federal measure to phase out the $500,000 business limit for corporations that earn between $50,000 and $150,000 of passive investment income in a taxation year. The federal changes apply for tax years that begin after 2018. The Ontario government will propose legislation to ensure that Ontario will not parallel this new federal restriction. All eligible Ontario small businesses will continue to receive the Ontario small business deduction. For tax years starting after 2018, Schedule 500 line 3 will now calculate without the effect of the federal changes.
Research and Development Tax Credits
The 2018 Ontario budget announced enhanced tax credits to the Ontario Research and Development Tax Credit and the Ontario Innovation Tax Credit. Ontario will review tax support provided for research and development activity and, as such, the Ontario government will not be implementing these changes. In Schedules 508 and 566, if you enter an expenditure amount in the March 27, 2018 budget fields, TaxCycle will trigger a review message to remove the amounts. These forms will be correctly updated when the CRA releases official copies of the forms.
The rates for tips paid effective August 15, 2018 have been updated. For further information, refer to the press release from Revenu Québec: New Reduction of the Health Service Fund Contribution for SMBs as of 2018.
In response to a request on www.protaxcommunity.com, we have added the following fields to the TaxCycle to TaxCycle T3 carryforward: