Tax Changes for Employees in 2019

Evelyn Jacks

A number of tax changes for employees have been implemented for the 2019 tax filing year which officially begins on February 24 when the CRA opens their electronic gates for EFILE transmissions. What should you know before the tax season begins?

Canada Workers Benefit. The former Working Income Tax Benefit is now the Canada Workers Benefit.  The benefit will be enhanced for 2019 to compensate for increased costs for Canada Pension Plan contributions starting in 2019.

• For 2019, the benefit will be 26% (increased from 25%) of earned income over $3,000 (this threshhold is unchanged and not indexed). 
• The maximum benefit will be increased to $1,355 in 2019 for single taxpayers and $2,335 in 2019 for couples and single parents.
• The clawback rate will be 12% in 2019 for income over $12,820 for singles and $17,025 for families.In addition, for disabled taxpayers, the new Canada Workers Benefit will be increased to $700.This benefit is reduced at a rate of 12% when only one partner is disabled and 6% when both partners are disabled. The clawback begins at $24,111 for one disabled and $36,483 when both spouses are disabled.

Provincial changes: For 2019, British Columbia uses the same rates as most other provinces. The only jurisdictions with different rates for this provision for 2019 are Alberta, Quebec and Nunavut.

T2202 Reporting for CWB purposes. CRA will be allowed to include the benefit in the assessment for taxpayers who qualify but do not apply for the benefit by completing Schedule 6 (Canada Worker’s Benefit) when they file their tax returns. To implement this and certain other tax measures, designated educational institutions be required to report to the CRA prescribed information regarding the enrolment of students (number of months of full- and part-time attendance) on Form T2202. Flying schools will also use this form.

Certain Allowances for Members of Legislative Assemblies and Certain Municipal Officers.  A portion of allowances received by these taxpayers to cover costs incurred in the course of carrying out the duties of office or employment will become taxable for some. Specifically, non-accountable allowances received cannot exceed more than half of the official’s salary or other remuneration to be tax exempt. Effective 2019, any non-accountable portion of these allowances will be fully taxable; accountable allowances will remain non-taxable. 

CPP Contributions Increase.  Above a basic exemption of $3500, prior to 2019, employees contributed 4.95% of their pensionable earnings to the Canada Pension Plan (up to the annually set maximum contributory earnings). The employer matched this contribution.  

But for 2019 there is an “enhanced CPP premium”. That is, the maximum premium is 5.1% (both portions – employer and employee - are 10.2%).  Employees will claim their enhanced premium over the base amount of 4.95% on new line 22215; the balance as a non-refundable tax credit on line 30800.  This is all calculated on the new 8-page Schedule 8.

For the self-employed, a contribution of 10.2% of net eligible contributory earnings, is required, but one half of this amount can be claimed as a deduction on the T1 return on new line 22200;  the other half as a non-refundable tax credit. 

Note that benefits will accrue starting in 2019 but a full two-thirds of income replacement will not occur until the worker has contributed for 40 years. This means if you are currently approaching retirement, you will see no increase in your pension despite the higher premiums.

Canada Employment Credit.  Employees can’t claim the costs of going to work, like lunches, dry cleaning or driving to and from the place of employment.  As an acknowledgement of these costs, a non-refundable tax credit is available.  It’s an indexed amount of $1222 in 2019.  As Schedule 1 has been eliminated on this year’s tax return,  look for this credit on page 6  of the new 8-page T1. 

Additional educational resources: Did you miss the Winter CE Summits? You can get a copy of the Knowledge Journal for only $395. It’s the most current professional guide to all of the changes on the T1 tax return, and it’s ideal for employee training. Call 1.866.953.4769 to get your copy.

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