H&R Block Insight

In March, Statistics Canada announced that more than 83,000 Canadians had lost their jobs in February. As the economic situation remains uncertain, recently unemployed Canadians need to understand the tax implications associated with employment insurance, severance payments and pension entitlements.

If you have been laid off in the first half of the year and paid income tax based on your annual salary, you can't claim this on your 2008 tax return. You have to wait until you file your 2009 tax return before you can access any excess income tax paid.

If you qualify for Employment Insurance and your net annual income for the year is more than $51,375, you are required to pay back part of your benefits. For Canadians who are laid off and then find another job later in the year, this could result in a surprise at tax time. The situation may be compounded by the fact that insufficient tax is often withheld at source from EI benefits.

For Canadians who received a severance or retirement package, you may be able to contribute more money into your Registered Retirement Savings Plan (RRSP). You can transfer up to $2,000 per year to your RRSP for years of service prior to 1996 and $3,500 per year for years of service prior to 1989.

Be careful if you decide to withdraw funds from your RRSP - it can have serious tax implications. The amount you take from your RRSP is added to your income. Your financial institution will withhold some monies for tax purposes, but it may not be enough and you could end up with a balance owing on your next return.

If your entitlement to registered retirement plan or deferred profit sharing plan benefits is reduced as a result of your termination, you will receive a pension adjustment reversal. This restores the RRSP deduction room previously lost due to your participation in the plan.

Be sure to see a tax professional to learn more about job loss tax implications.

Every year, Canada welcomes thousands of new immigrants. If you were welcomed to the country in 2008, you may not be familiar with the Canadian tax system but it is something important to learn about. Even if you are new to Canada, Canada Revenue Agency still expects to see your tax return.

Here are some basic things to know about the Canadian tax system. You are taxed based on residency so this means that if you are living in Canada full time you are required to file a tax return.

All immigrants to Canada will have a period when they were residents of Canada and a period when they were not a resident. Determining these two distinct periods is necessary when calculating your income for tax purposes.

For the period of residency in Canada, you must report all income, from anywhere in the world, on your Canadian income tax return.

For the period prior to establishing residency, immigrants are taxed as non-residents. Worldwide income is not reported and taxed; the income you are required to report on a Canadian tax return is:

employment income earned in Canada
income from carrying on business in Canada
taxable portion of Canadian-source scholarships, bursaries, fellowships and research grants
taxable capital gains arising from the disposition of taxable Canadian property

Pension income is subject to non-resident withholding tax; this represents the final tax obligation to Canada on this income and therefore is not reported on a tax return. A notable change to interest income; as of 2008, a non-resident who receives interest from Canada is exempted from non-resident withholding tax when dealing at arm's length with the Canadian payer.

Even if you don't have a Social Insurance Number, you should still file a tax return. Filing a return triggers a number of benefits and credits that you could qualify for. And if you are unsure what income you need to claim, ask a tax professional before you are welcomed by a tax bill from the CRA.

According to a recent survey by H&R Block and Angus Reid Strategies, nearly three quarters of Canadians say they did not claim any new tax credits on their 2007 tax return. Considering that last year, a number of tax credits and changes were introduced that would benefit just about every Canadian taxpayer.

For taxpayers who did take advantage of the new tax credits on their 2007 tax return, 18 per cent said they claimed the Child Tax Credit. Pension Income Splitting (16 per cent) and the Transit Pass Credit (15 per cent) were the next most popular. The Children's Fitness Credit (14 per cent) and the Working Income Tax Credit (11 per cent) were the other tax credits mentioned.

Make sure you claim all the tax credits and deductions you are entitled to so you can maximize your tax refund. If you have any questions, make sure you consult a tax professional. And remember to file your tax return by April 30.