Happy Halloween!

Happy Halloween from Intaxicating Tax Services.

Is there anything scarier than taxes?!?

Possibly the taxing authorities and some of the people that work there…

Death and Taxes
Death and Taxes (Photo credit: Thomas Hawk)

Boo!

We’re not afraid of Halloween, taxes OR the government!

#IntaxicatingTaxServices

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TTC fares to increase! Don’t forget the CRA’s Public Transit Deduction.

The Toronto streetcar system is an extensive t...
Public Transit (Photo credit: Wikipedia)

Whether you like it or hate it, it is almost a certainty that TTC fares will be increasing in the City of Toronto at some point later this year or early in 2014.  The City of Toronto requires additional funding in order to FINALLY start building subways in the city and the TTC needs extra funds to improve it’s crumbling infrastructure.

Either way, if you are a user of public transit, you need to be aware that you may be eligible for the Canada Revenue Agency’s Public transit deduction.

Eligibility:

These passes must permit unlimited travel within Canada on:

  • local buses;
  • streetcars;
  • subways;
  • commuter trains or buses; and
  • local ferries.

You can also claim the cost of:

Shorter duration passes if:

  • each pass entitles you to unlimited travel for an uninterrupted period of at least 5 days; and
  • you purchase enough of these passes so that you are entitled to unlimited travel for at least 20 days in any 28-day period

Electronic payment cards if:

  • the card is used to make at least 32 one-way trips during an uninterrupted period not exceeding 31 days; and
  • the card is issued by a public transit authority that records and provides a receipt for the cost and usage of the card.

Who can claim these deductions?

Only you or your spouse or common-law partner can claim the cost of transit passes (to the extent that these amounts have not already been claimed) for:

  • yourself;
  • your spouse or common-law partner; and
  • your or your spouse’s or common-law partner’s children who were under 19 years of age on December 31, 2012.

But I do my own tax return.  Where does this go?

It goes on line 364 of Schedule 1, Federal Tax, enter your total public transit amount.

Amount shown on a T4 slip – Enter the amount from box 84 on line 364 of Schedule 1.

Note: If your employer paid your public transit pass, it is a taxable benefit included in your employment income.

Reimbursement of an eligible expense – You can only claim the part of the amount for which you have not been or will not be reimbursed. However, you can claim the full amount if the reimbursement is included in your income, such as a benefit shown on a T4 slip, and you did not deduct the reimbursement anywhere else on your return.

Always remember that if you are going to claim this amount you must keep your Supporting Documentation – receipts and transit passes – In case the CRA asks to see them at a later date.

The CRA will need the following in order to support your claim;

Your transit pass must display all of the following information to support your claim:

  • an indication that it is a monthly (or longer duration) pass;
  • the date or period for which the pass is valid;
  • the name of the transit authority or organization issuing the pass;
  • the amount paid for the pass; and
  • the identity of the rider, either by name or unique identifier.

If the pass does not have all of this information, you will also need to keep receipts, cancelled cheques or credit card statements, along with your pass(es), to support your claim.

The CRA will accept receipts (letters) generated by employers or Employer Pass Program Coordinators for employer transit pass programs.  The receipt should note the purpose, exact amount received, date of payment, and name of the payee.

Generally, the CRA will NOT consider a bank statement to substitute for a valid receipt, however, if your bank statement clearly indicates the purpose of the debit (for example, Employee FareCard), they will accept it as support for your claim.

If your current accountant does not ask you whether you take public transit, then you need to think about what else they are ignoring, and what other deductions you may be missing.

#Intaxicating

Passionate about Tax.  Passionate about helping people.

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A link to the CRA website to verify this information is below.

Line 364 – Public transit amount

Is It Possible To Raise A Child In Canada On $3000-$4000 Per Year? Use Your Tax Credits.

I had a nice conversation the other day with a representative from the CBC regarding the findings made public  by The Fraser Institute, stating that it has never been easier financially, to raise a child in Canada.

My immediate thoughts were that it was absolutely not possible to do this.  I even tried to convince the reporter that the figures being tossed around of $10,000-$12,000 per year were low.   How could this be possible?  I mean once you take into consideration child care (daycare or a nanny), you’re at the high-end of that estimation.  Taking out of the equation that a major city in Canada – such as Toronto – has certain added costs, I pictured a rural community, handed-down clothing, one-parent working and home-grown veggies in the summer and I still came in over $4000.

Then I learned that this figure did not take into consideration child care.

Okay, so it might be possible…  Might.

A couple of hours after speaking with the CBC, I heard Dr. Sarlow (who prepared this report), explain on AM640 that these figures represented the low-end of the scale.  $3000-$4000 are what parents can expect to spend for the necessary expenses such as food, fitness, clothing, personal care and school supplies.  All of this, of course, takes into consideration that the parents are being as fiscally responsible as possible and buying only what is absolutely necessary.

Even in cases where a parent stays home to look after the child(ren) or if there are parents or grandparents available to do this, there is still an opportunity cost of the lost income from that parent not working and earning income instead.  I do not agree that through the omitting of childcare expenses there is a belief that the majority of Canadian families have zero child-care costs.  In fact, the report states that childcare expenses are “best treated as a special expense for families for whom it applies.”

As a tax professional and a father of 3 young children in one of Canada’s most expensive cities, I can say that it takes more than “income” to be able to “afford” my children.    The Canadian government (CRA)  has made many benefits and credits available to help families with their expenses throughout the year and reduce the amount that they owe at tax time, including;

  • Working income tax benefit (WITB) – Working individuals and families with low-income may be able to claim this refundable tax credit. The WITB includes a supplement for individuals who qualify for the disability amount.
  • Children’s fitness tax credit – Children who played soccer, took ballet classes, or participated in a  program of physical activity in 2012 may be eligible for a tax credit up to $500, per child, of the cost of these activities for a non-refundable tax credit of up to $75 for each child.  An additional $500 for each eligible child who qualifies for the disability amount and for whom parents have paid a minimum of $100 in eligible expenses is also available.
  • Children’s arts tax credit – Parents of children who participated in a program of artistic, cultural, recreational, or developmental activity in 2012 may be able to claim up to $500 of the money spent per child on these activities for a non-refundable tax credit of up to $75 for each child.  An additional $500 for each eligible child who qualifies for the disability amount and for whom parents have paid a minimum of $100 on registration or membership fees for an eligible program.
  • Child care expenses – Did your children attend daycare or a program such as a summer day camp in 2012? You or your spouse or common-law partner may be able to claim what you spent on eligible child care in 2012.
  • Family caregiver amount – If you have a dependant with a physical or mental impairment, you may be able to claim up to an additional $2,000 when you claim certain non-refundable tax credits.
  • Goods and services tax/harmonized sales tax credit – The GST/HST credit is a tax-free quarterly payment that helps individuals and families with low and modest incomes offset all or part of the GST or HST that they pay.
  • Public transit amount – Did you or your eligible dependant use public transit in 2012? You may be able to claim the cost of certain public transit passes or electronic payment cards under this non-refundable tax credit.
  • Child disability benefit – Parents may be eligible for this tax-free benefit if they cared for a child under the age of 18 who is eligible for the disability tax credit.
  • Canada child tax benefit – A tax-free monthly payment that helps eligible families with the cost of raising children under the age of 18.
  • Universal child care benefit – If you have children under the age of six years, you may be eligible for this taxable benefit, which supports child care choices for families.
  • Medical expenses – You may be able to claim a non-refundable tax credit based on the medical expenses paid for you, your spouse or common-law partner, or your children for any 12-month period ending in 2012.
  • Disability amount – If you or a family member has a severe and prolonged impairment in physical or mental functions, you may be able to claim this non-refundable tax credit.
  • Registered disability savings plan (RDSP) – A RDSP is a savings plan to help Canadians with disabilities and their families save for the long-term financial security of a person who is eligible for the disability tax credit.

In addition, in situations where parents or grand parents look after children, the family is missing out on the childcare tax credit where parents can claim payments for childcare expenses made to; caregivers, nursery schools, daycare centres, educational institutions for the part of the fee relating to childcare services, boarding schools, day camps and day sports schools.

These expenses cannot be claimed if the child care is provided by an individual who is the child’s father or mother, another individual, a related person under the age of 18-years-old, or a blood relative, or someone connected through marriage, common law partnership or adoption.

So is it better to spend the least amount of money possible when raising children, or to be aware and take advantage of the benefits and credits available to assist with raising the next generation of public policy analysts?

In today’s hyper-competitive, global economy, parents need to find ways to give their children the edge against their future competition and the best way to do this is to take advantage the credit and benefits available.

If you are now checking you prior-year tax returns to see if you claimed any of these tax credit and you did not, do not worry.  In-TAX_icating Tax Services will review your previously filed tax-returns and correct them for you.

http://www.intaxicating.ca

The Biggest Taxation No-No’s. EVER!

Canada Revenue Agency
Canada Revenue Agency (Photo credit: John Bristowe)

Working in the Canada Revenue Agency for almost 11-years, I learned a thing or two about how the CRA operates as well as what is a red flag for them and what the CRA often let’s slide.  It helps when I negotiate with them that I know their policies, procedures and how to navigate their systems as well as they do, or even better.  I’ve used this knowledge to help my clients save millions of dollars of taxes.

With that in mind, I want to help you save unnecessary expenses, so I decided to reveal the 8 Biggest Taxation No-No’s EVER.

8.  Try and do it yourself.  Taxation is a complicated topic for many and if you don’t live and breathe tax then you should consider either hiring someone to help you along or at the very least hire someone to set you up correctly and who will take the time to learn about you and your business so that you are getting all of the tax deductions and credits available to you all the time.

7.  Think that you are above taxation.   Everyone pays taxes no matter their income level; whether it be income tax, payroll tax, or consumption tax.  To think that there is a magic “Pay no tax” card is a huge mistake and the CRA does not take “detaxers” or the underground economy lightly..

6.  Brag about not paying taxes / scamming the government.  Our tax system here in Canada is a self-assessing system with the government’s responsibility being the checks and balances.  It’s not that they don’t trust you but… They don’t trust you, which is why they have huge departments responsible for catching the tax cheats.  If the government doesn’t get you, your ego might;

5.  Post information online about yourself or your business and think that the government will not see it and use it against you.   The “government” are a bunch of people like you and I who are trying to make a living.  If you claim you are suffering from financial hardship yet post pictures on Facebook showing yourself living it up, or if you claim to be Canadian and your profile states that you are born in the US, the collectors or auditors will find it and us it against you.

4.  File late, miss installment payments or fail to make remittances.  All this will do is add penalties and interest onto your tax account and there are very few excuses the government will accept to have them reversed or cancelled.   Many large tax debts start in just this way.

3.  Carry a balance.  If at all possible it is critical to make sure that you do not carry a balance with the CRA.  With interest being charged at a floating rate of just over 10%, compounding daily, your balance can grow at a shocking rate.  The CRA is not a bank and you should not think it’s okay to treat their debt as a bank loan.

2.  Don’t be afraid to search online for your tax advice.  Not only has the CRA moved to strengthen their online presence but there are a lot of professionals online who have posted their experiences with the CRA and steps they took to resolve tax problems for themselves and their clients.  Anyone suggestion otherwise is doing so to avoid you from finding out there are other – better – tax solution providers in Canada.

1.  Thinking that anyone can help you.  This is the absolute biggest tax no-no I have encountered in 17-years of taxation.  If you have an electrical problem at home, do you call a plumber?  Would you ask a dentist to perform open-heart surgery?  How about asking a former auditor to help you with a collections problem, or an appeals officer to help you correct your payroll nanny account issues?  How about going to an Insolvency firm to have a lien removed from you house which was placed there by CRA collections?

It doesn’t make sense but don’t get me wrong.  If you have created a tax crime, such as tax evasion,  you will need a tax lawyer, and if you need tax returns prepared, they need to be done by an accountant, and a former CRA auditor is the right solution if you have a difficult, complex corporate tax audit underway,

In taxation it is critical that you have experience on your side when you work to resolve your tax issues and understanding the way the CRA operates is more important than you could imagine.

Tax debts begin with audit or compliance issues.

Then they go to collections.

Collections leads to enforcement – garnishments, requirements to pay (RTP), liens, seizures, director’s liability, and much more.

You need experienced former collections staff to help you, and with almost 11-years of progressive collections experience in all areas, from collector to resource officer, to team leader, believe me when I say that experience helps!

When your representative knows more than the collector, or trained that collector, you know you have the best representation possible.

To leave your $250,000 tax liability to anyone else would keep me up at night too.