It’s that time of year again – Tax Season. April 30, 2015—the deadline for filing your taxes in Canada—is fast approaching and we want to make sure you aren’t dreading this time of year. For those of you opting to do it yourself – it gets complicated knowing what deductions you’re eligible for, what you can claim, etc on your tax return. We’ve compiled a list of 10 tax tips to help you through this process:
- Medical Expenses
- RRSP Contributions
- Self-Employed Income and Expenses
- Income Splitting and Credits
- Employment Expenses
- Child Care Expenses
- Child Activity Credits
- Donation Slips
- File on Time and Report all T-slips
- Know your limits
While a large number of Canadians opt to do their own taxes, there are many Canadians that use a professional accountant. As your life becomes more complex, your taxes become more complex – no longer a weekend chore you do once a year but a huge headache and a lot of time devoted to figuring out all your expenses, deductibles, credits, etc etc etc. You don’t want to leave any money on the table or miss something that could potentially cost you interest or penalty payments in the future.
If you think this is the year that your taxes are more complex than you’re willing to handle, feel free to contact one of our trusted professionals to see how we can help you this tax season!
We cannot stress the importance of filing on time! If you owe taxes for 2014 and do not file your 2014 return on time, you will be penalized 5% of your 2014 balance owing, plus 1% of your balance owing for each full month your return is late up to 12 months.
If you’ve filed late in the past few years, you will be penalized 10% and owe 2% per month up to 20 months. So get your returns filed and report all your T-slips. If you think you’ll struggle to meet this deadline or have repeatedly in the past – visit a trusted accountant that will help you file on time!
Do you have a pile of donation receipts from charitable donations you’ve made this year? Collect those for tax credits!
The first $200 of charitable donations qualify for a 15% tax credit. When you surpass the $200 threshold you receive a 29% tax credit. All donation receipts must be issued by certified approved donation programs registered with CRA.
Search on the CRA website for the charitable status of an organization you support.
Have you enrolled your children in sports or arts programs? These government allows parents to claim these through the arts and fitness tax credits.
Parents can claim a maximum of $1,000 per eligible child for arts tax credits and $1,000 for fitness tax credits. To claim these tax credits, your child must be under 16 years old at the beginning of the year in which you paid the expenses for the program. You can also claim these credits for a person who is under 18 if they qualify for the disability amount at the beginning of the year in which the expense was paid.
If you are unsure whether a program is eligible, you can ask the program administration if it is and which category the program qualifies for. The receipt you receive will also indicate what amount is eligible for these credits.
For more information visit the CRA website:
Do you have children in child care between the ages of 0-11 years old? This may be deductible!
Child care expenses will be claimed automatically by the spouse/common-law partner with the lower net income, with some exceptions. You must have earned income throughout the year in order to be eligible for this claim. CRA has placed a maximum deduction limit of $7,000 per child under 7 years old and $4,000 per child from 7 to 11 years old, or has impairment in physical or mental functions.
Do you incur expenses as part of earning your employment income? These may be deductible!
CRA allows certain salaried and/or commission employees to deduct employment expenses. For example, you may be able to deduct the part of airtime expenses for a cell phone that relates to earning your employment income.
In order to deduct employment expenses on your personal tax return, Form T2200 Declaration of Condition of Employment must be filled out by your employer and kept in the event that CRA requests it. For specific guidelines on who qualifies for employment expenses deductions look to the CRA website for a full list of applicable expenses.
Are you aware of all the credits that are available for your Canadian personal tax return? Have you looked at the benefits of income splitting?
Families can benefit from the newly introduced Family Tax Cut. This is a non-refundable tax credit of up to $2,000 for eligible couples with minor children under the age of 18.
Married or common-law couples earning pensions income can also elect to take advantage of the pension income splitting. This would allow the use of the spouse’s lower tax rates and possible increased pension credit.
Are you operating a small business in Canada or thinking of starting one? There are some great tax benefits to being your own boss!
There are claimable expenses such as travel, means, entertainment, and home office or telephone use when conducting income generating business. If you’re unsure of what expenses can be claimed, check out the CRA website for a list of the various eligible claims and get information on any small business/self-employed questions.
If you earn greater than $30,000 gross income in one calendar year, then you must register for an HST number with CRA. Also, if you have employees on payroll, you must register for a payroll account while maintaining the same business number.
Have you ever wondered if it is time to roll over your small business into a sheltered corporation? If so, please feel free to contact one of our professional staff for a consultation.
There are two questions you should ask every year – How much RRSP contribution room do I have? How much should I contribute?
Your annual contribution limit for RRSPs are based on the lesser of 18% of your earned income and annual maximum (for 2014 this is $24,270 and for 2015 this is $24,930). However, you may be entitled to deduct more! Any unused amount of RRSP deduction from 1991 to 2013 is available for use now. Your RRSP contribution can be found on your Notice of Assessment from the previous taxation year.
When making contributions to your RRSP accounts, CRA allows an individual to claim the amount as an offsetting deduction against your net income for that year, resulting in lower taxes payable. However, it is important to not exceed your contribution limit. CRA imposes harsh penalties on the over contributions (1% per month starting the day the over-contribution was made and the interest is compounded daily).
When considering how much to contribute – take a look at your income and what your tax rate is. If you have a current low tax rate but could be in a higher tax rate in the near future, hold off on large contributions to maximize future benefit. If you have a higher tax rate and a large contribution could place you in a lower tax rate, you could benefit from large contribution. Do what makes the most sense for your income and tax rate.