Author Archives: Allan

Tax Tip #26 – Universal Child Care Benefit

Did you know that if you have a child or children under the age of six, you can receive the Universal Child Care Benefit (UCCB)?

What is the Universal Child Care Benefit?

The Universal Child Care Benefit is designed to help Canadian families, as they try to balance work and family life, by supporting their child care choices with direct financial support. The UCCB is paid in instalments of $100 per month per child for children under the age of six. To receive the UCCB, you must complete Form RC66, Canada Child Benefits Application.

For more information about the UCCB, visit http://www.universalchildcare.ca.

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Tax Tip #25 – Keep Your Records to Support Your Income Tax Return

Canadians who filed their income tax return electronically or who have not enclosed their information slips and receipts with their paper-filed return should keep their tax records on hand in case they are contacted by the Canada Revenue Agency (CRA) or Revenu Quebec (MRQ).

After returns are filed, the CRA and MRQ begin work to verify reported income, as well as credits and deductions claimed. These reviews are an important method to ensure Canadians are paying their fair share of taxes.

Some of the reviews of deductions and credits are done when returns are filed and before taxpayers receive their notice of assessment. However, most reviews take place later in the year, as the CRA and MRQ work to verify the information on an individual’s return and compare it with information provided by other parties, such as an employer or spouse.

During this review process, the CRA and MRQ may contact taxpayers by mail, to ask for more information on income or credits. They may ask for copies of receipts or information slips to support a number of different claims, for example:

  • medical expenses
  • charitable donations
  • child care expenses
  • spouse or child support payments
  • moving expenses

Keeping your records on hand makes it easier to respond to these requests and will help you explain your tax and benefit situation to the CRA and MRQ.

Generally, you should keep your supporting documents for six years. Have the receipts and documentation to support your claims ready in case you are selected for review.

Source: Canada Revenue Agency

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Tax Tip #24 – New Children’s Arts Tax Credit

For 2011 and subsequent years, there is a new non-refundable tax credit for the cost of registration or membership of your child in a prescribed program of artistic, cultural, recreational or developmental activity.

You may claim eligible expenses of up to $500 per year for each of your children who are:

  • under 16 years of age at the beginning of the year in which the expenses are paid.
  • under 18 years of age at the beginning of the year in which the expenses are paid if the child is eligible for the disability tax credit.
  • Also, if at least $100 in eligible expenses has been paid for a child eligible for the disability tax credit, an additional amount of $500 can be claimed for that child.

To be eligible, a program must be supervised and suitable for children. Eligible programs include:

  • a weekly program of a minimum eight consecutive weeks duration in which a minimum of 90% of all the activities are eligible activities.
  • a program of a minimum five consecutive days duration in which more than 50% of the daily activities are eligible activities.
  • a program of a minimum eight consecutive weeks duration offered to children by a club, association or similar organization offering a variety of different activities when more than 50% of the activities offered are eligible activities or more than 50% of the time scheduled for activities offered to children is for activities that are eligible activities (if both 50% tests are not met, a prorated portion of the fees will be allowed, representing the percentage of eligible activities offered by the organization or the percentage of time scheduled for these activities by the organization).
  • a membership of a minimum eight consecutive weeks duration in an organization if more than 50% of all the activities offered to children by the organization are eligible activities (if the 50% test is not met, a prorated portion of the fees will be allowed, representing the percentage of eligible activities offered to children by the organization).
  • A program that is part of a school curriculum will be ineligible.

Eligible activities will include an activity that:

  • contributes to the development of creative skills or expertise in artistic or cultural activities.
  • provides a substantial focus on wilderness and the natural environment.
  • helps children develop and use particular intellectual skills.
  • includes structured interaction among children where supervisors teach or help children develop interpersonal skills.
  • provides enrichment or tutoring in academic subjects.

Source: Canada Revenue Agency

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Tax Tip #23 – Can’t Pay Your Taxes?

Did you know that if you can’t pay your taxes, you may contact the Canada Revenue Agency about a payment arrangement?

If you can’t pay the full amount of taxes you owe to the Canada Revenue Agency (CRA), you may be able to make a payment arrangement. If we determine that you are unable to make a full payment, an agent can work with you to develop a plan to help you pay your taxes.

Here are some important questions:

I owe more than I can pay. What do I do?

If you have reasonably tried to pay your taxes owing, contact the CRA to make a payment arrangement by:

  • calling the CRA Debt Management Call Center at 1-888-863-8657
  • making a pre-authorized debit payment using My Account
  • calling 1-866-256-1147 to make a TeleArrangement

For more information, visit Payment Arrangements.

How do I make a payment?

There are several different ways to make a payment on your taxes. You can pay:

  • through My Payment, a secure, online payment service available on the CRA Web site
  • through your financial institution by Internet or telephone banking
  • by mailing the CRA a cheque or money order
  • in person at a Tax Services Office, using a cheque, money order, debit card, or cash (exact change is required).

For more information, see Electronic payments for individuals.

What happens if I pay my taxes late?

If you think your payment will be late, contact the CRA as soon as possible. Late or insufficient payments can result in interest charges. Interest is calculated on the amount owing starting on the date the payment is due, and is compounded daily at the prescribed rate. You should always try to pay as much as you can on time. This will reduce the amount of interest you will be charged.

The CRA sets the interest rate on a quarterly basis. The current quarterly prescribed interest rate charged by the CRA is 5%.

Are there other consequences of paying or filing late?

Late or insufficient payments and late returns can also result in penalties being charged. The amount of the penalty will depend on various factors, including how late the payment or return is, how much is owed, and whether you have been late with a payment or return in the past.

Depending on the situation, you may face other consequences as well. For example, if you are entitled to a refund, the CRA could withhold your refund or family benefits, such as the GST/HST credit, until you file all outstanding returns. Furthermore, the CRA can withhold some or all of your refunds and apply them to other amounts you owe.

Interesting Statistics

Last year, through the CRA Debt Management Call Centre, some 296,000 payment arrangements were made with individual taxpayers who were unable to pay their taxes when due. They met their tax obligations by filing on time and concluding a payment arrangement for amounts due.

Source: Canada Revenue Agency

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Tax Tip #22 – Donate Wisely

Important facts about charitable donations

  • Use the Canada Revenue Agency Charities Listings at www.cra.gc.ca/charitylists to:
    • Confirm the charities’ registration status
    • Locate charities in your neighborhood
    • Learn about charities’ activities and programs
    • Review charities’financial information
  • The first $200 you donate to registered charities is eligible for a federal tax credit of 15%. After the first $200, the credit increases to 29% of the amount over $200.
  • You do not have to claim all the donations you made this year on your current-year tax return. You can carry forward any donations that you do not claim in the current year and claim them on your return for any of the next five years
  • To claim a tax credit, You Will Need an official donation receipt. registered charities do not have to issue receipts. So, if you are planning to claim a tax credit, “check the charity’s receipting policy before you donate.
  • Gifts of services do not qualify for official donation receipts.

To learn more about charitable donations, go to www.cra.gc.ca/donors or watch the Giving to Registered Charities 101 videocasts on the CRA YouTube channel.

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Tax Tip #21 – Liability After a Death

Did you know that as the legal representative of a deceased person, you can be held liable for any taxes that the deceased person owes?

Protect yourself by obtaining a clearance certificate from the Canada Revenue Agency before you distribute any property under your control. A clearance certificate certifies that all amounts for which the deceased is liable to us have been paid, or that we have accepted security for the payment. If you do not get a certificate, you can be liable for any amount the deceased person owes. The certificate covers all tax years to the date of death, but it does not apply to amounts owed by a trust. If a trust exists, a separate clearance certificate is required for the trust.

Make your request only after you have received the notices of assessment for all the returns filed and paid or secured all amounts owing for the deceased person. To request a certificate, complete  Form TX19, Asking for a Clearance Certificate, and send it to the Assistant Director, Audit, at your tax services office. By including supporting documentation, you will help us issue the certificate without delay.

Source: Canada Revenue Agency http://www.cra-arc.gc.ca/menu-eng.html

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Tax Tip #19 – Fitness Tax Credit

Did you know that you may be able to claim the fees paid for physical fitness programs for your children under the age of 16? The children’s fitness tax credit provides parents with an annual credit of up to $500 per child to help cover the cost of their child’s physical fitness programs or sporting activities fees.

To learn more about the credit and to understand the qualifications contact us.

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Tax Tip #18 – Tips for Self-Employed Individuals

Are you self-employed? If so, you have until midnight on June 15, 2012, to file your 2011 income tax and benefit return. You must pay any balance owing for 2011 on or before April 30, 2012, regardless of your filing date.

According to Statistics Canada, just under 2.7 Million Canadians were self employed in 2011.  That’s almost a 100% increase over the 1.4Million Canadians self employed in 1981.  Self employed businesspeople and contractors have the luxury of certain tax deductions which their employed counterparts do not have.

So what can the self-employed deduct? Below is a general list of deductible items which may or may not apply to the individual in business:

  • Advertising expenses
  • Meals and entertainment @ 50%
  • Bad debts
  • Insurance premiums (not on personal residence)
  • Interest and/or bank fees
  • Business tax, fees, licenses, dues, memberships, and subscriptions
  • Office expenses
  • Supplies
  • Legal, accounting, and other professional fees
  • Management and administration fees
  • Rent (not personal residence)
  • Salaries, wages, and benefits (including employer’s contributions)
  • Property taxes (not personal residence)
  • Travel (including transportation fees, accommodations, and allowable part of meals)
  • Telephone and utilities
  • Delivery, freight, and express
  • Motor vehicle expenses (not including CCA)
  • Capital cost allowance (CCA)
  • Other expenses

In addition to these expenses, if the individual has a home office, he/she can deduct a portion of his/her home expenses.  These may include:

  • Heat
  • Electricity
  • Insurance
  • Maintenance costs
  • Mortgage interest
  • Property taxes

Keep adequate records if you are carrying on a business or engaged in a commercial activity in Canada. The records have to provide enough detail to determine your tax obligations and entitlements and have to be supported by original documents.

Source: Canada Revenue Agency http://www.cra-arc.gc.ca/menu-eng.html

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Tax Tip #17 – How to Claim Medical Expenses

Did you know that you can claim, as a non-refundable tax credit, medical expenses for yourself, your spouse or common-law partner, and your children born in 1994 or later?

For 2011, the total expenses have to be more than 3% of your net income, or $2,052, whichever is greater. If you are married or common law, then you can pool your medical expenses together.  You may also be able to claim medical expenses for the following persons if they depend on you for support:

  • you or your spouse or common-law partner’s child or grandchild who was born in 1993 or earlier; and
  • you or your spouse or common-law partner’s parent or certain close relatives who lived in Canada at any time in the year.

There is a separate calculation for the medical expense tax credit for other eligible dependents.

Medical expenses can be claimed for any 12 month period ending in the current tax year (and not claimed in the prior tax year). Generally, all eligible medical expenses can be claimed, even if they were incurred outside of Canada. When medical expenses are reimbursed by an insurance plan, only the portion not reimbursed can be claimed.

Source: Canada Revenue Agency http://www.cra-arc.gc.ca/menu-eng.html

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Tax Tip #16 – A Change of Marital Status

If your marital status changed during the current tax year, the calculation of benefits and credits paid by the Canada Revenue Agency (CRA) and Revenu Quebec could be affected. You should notify the Tax Agencies of the change, in writing, as soon as possible after it takes place, and also update your marital status on your current tax return. In some situations, you may be eligible for additional Canada Child Tax Benefit (CCTB) and/or goods and services tax/harmonized sales tax (GST/HST) credit payments. Notifying the CRA of this change also ensures that you are not subject to CCTB or GST/HST credit overpayments, and that your benefit and credit entitlements are correct.

Both the CRA and Revenu Quebec have the right to demand overpayments to be paid back within 30 days if not, the balance will be subject to additional interest.

Source: Canada Revenue Agency http://www.cra-arc.gc.ca/menu-eng.html

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