Why laid-off oil workers could face a bigger income tax bill at home

People once went to Alberta for jobs, now some are leaving but could face a higher tax bill when they get home.
People once went to Alberta for jobs, now some are leaving but could face a higher tax bill when they get home. Larry MacDougal / The Canadian Press

When times were good, Canadians moved from across the country to the oilpatch in Alberta looking for work.

But crude prices collapsed last year, throwing thousands of them out of work. That could mean big bills come tax time for those who returned to their home provinces before the end of last year.

David Steinberg, tax partner at EY, said if someone spent 10 months of the year in Alberta and then moved to New Brunswick, all of their 2015 income will be taxed at New Brunswick’s generally higher rate.

“The rule is you’re taxed in the province you resided on Dec. 31 of the year,” Steinberg said.

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The problem some may face is that employers generally withhold taxes on someone’s paycheque based on where they are working.

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READ MORE: 3 money-saving things people commonly miss when filing

But if they move to a higher-tax jurisdiction, they may not have deducted enough to cover the taxes that need to be paid in their home province.

That means a high-earning worker in Alberta who spent most of 2015 working in that province but lost their job and moved to Atlantic Canada before Dec. 31 could face a hefty bill.

Luann Jones-Foster, a tax partner at KPMG in Moncton, N.B., said just how costly that is depends on income and the difference between Alberta and the province people move to.

For someone who earned $125,000 last year in Alberta and then moved to New Brunswick, the bill could be around $5,650 for a single person with no other deductions, she said.

“Alberta versus Ontario, say for instance, is a little over $3,000 and Alberta versus B.C., interestingly enough, is only about $140,” Jones-Foster said.

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She noted that determining residency can be complicated, so if the difference in tax bills is big, people may want to seek professional advice if they moved late in the year.

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“Sometimes it will be clear cut, but sometimes it won’t be,” she said.

READ MORE:  5 things to know before filing your 2015 income tax returns

Steinberg said people who moved may be able to claim moving expenses that would help offset part of the higher tax rate, but he noted there are rules governing what can be claimed.

People who don’t have the money to pay their taxes when they file their return face interest charges, but the Canada Revenue Agency may be willing to work out a payment plan, he said.

“It is more than likely they will give you a payment plan if you are prepared to pay something,” he said.

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