Mar
9
By Fin MacDonald, Fin Tax Service
As we approach the tax filing deadline, which is April 30 this year (unless you or your spouse is self-employed – deadline is June 15, but taxes are due April 30), it’s important to begin preparing to file your tax return. Gathering the information needed is the most important part of this preparation. How does one go about this? Here are some tips.
First, when are the information slips due? Almost all slips are required to be sent to you by the end of February. If you have income from mutual funds (T3) or partnership units (T5013), these slips are due by the end of March. (If you have moved; are your slip issuers aware of you new address?) If you haven’t received your slips by the due date, you can call the Canada Revenue Agency @ 1-800-959-8281, and press the “*” key once you hear the recording to move to the queue for an agent. The CRA’s hours of service (until April 30) are Monday – Friday 9 AM to 9 PM, Saturdays 9 AM to 5 PM. There is no phone service Sundays, holidays or the Easter weekend.
The Canada Revenue Agency (CRA) each year in the fall runs their “Matching Program”. This involves comparing all of the slips that were issued by employers, government agencies, banks, mutual fund companies and others, with the slips Canadians reported on their tax returns. If the CRA finds that you have not reported income, they will issue a Notice of Re-Assessment reflecting the extra tax you owe, plus penalty and interest. If you fail to report income in two of the last four years the penalty can be 20% of the unreported income – PLUS the tax and interest. So, reporting all of your income can save substantial amounts of money.
I’ll look at a number of areas: Comparison, Life Changes, Moves and Tax Changes.
Comparison
When I have a potential client call or email me, the question I have is: Do you have your last 3 years of tax returns? Seeing what you have reported in previous years is important. If you had a T4 from ABC Inc. in 2013 showing employment income but you don’t have a T4 from them this year, the question is: Why? Did you leave their employment? Did the company close? What did you do afterwards? Did you apply for Employment Insurance? (which would cause a T4(E) slip to be issued).
So, as your slips come in, compare them with what you had last year. The same would apply to your deductions. If you had charitable donations, medical expenses, day care, carrying charges or other deductions last year but don’t have them (yet) this year, Why?
Life Changes
What stage in life are you in? Are you a student looking to file your first tax return? If so you would be looking for a Tuition and Education slip from the college or university you went to. Did you work part time or receive a scholarship or payments from a Registered Education Savings Plan? Again, each of these would generate a slip that needs to be gathered. Graduated? Interest paid on your student loans is another slip you might be looking for.
New parents? Employment Insurance maternity leave, Universal Child Care Benefit, day care expenses; these are a few of the slips that would be on your list. If you have adopted a child, the related expenses are deductible up to $15,000 per child; make sure you have the receipts. As the child grows, receipts for Arts and Fitness programs would follow.
Retirement? Many new sources of income would need to be documented; Old Age Pension, Canada Pension Plan, work place pensions and RRSP and RIF payments are common examples. Increasing medical bills are a common deduction that you might not have had before.
Marriage or Divorce? Are your investments held together? Did you buy a rental property together?
Moving
If you move more than 40km (25 miles) to earn employment income at a new location, your moving expenses may be deductible. This is especially true if you sold your former residence and purchased a new one. Gather all the receipts from the move and make sure all your slip issuers are aware of your new address.
Tax Changes
The biggest tax change is the “Family Tax Cut”. This is a hastily designed version of income splitting for parents who live with a child who is under the age of 18 at the end of 2014. Very few families will fully qualify for this tax break of up to $2,000 per family, because it requires the parents to be in different tax brackets. (When I look at my current clients, only one family will realize any savings from this.) If the parents are in the same tax bracket, or are low income, or are already doing the income splitting available for seniors, there will be no savings at all.
Next month I’ll look at common tax deductions that can help with my goal of Helping You to Keep More of YOUR Money. On Friday April 17 I will be at the James Bay New Horizons for their weekly Friday Forum to answer questions.
Fin MacDonald has over 20 years’ experience providing retirement and Income tax planning advice. Readers are however cautioned that responsibility falls on the taxpayer to ensure that all information is adequate and correct.