2. Why Use a Tax Expert?
Knowledge
* The Income Tax Act is very complicated, as are the myriad of Interpretation Bulletins regarding various tax issues
* Ongoing training is mandatory in order to build sufficient knowledge of existing rules and changes that occur
every year
Experience
* Seeing hundreds of tax returns every year, an expert can easily identify the right questions for each taxpayer
* An expert knows how to find the right answers, and how to apply that knowledge to the benefit of their client
Judgement
3. Why choose Focused Bookkeeping
* We believe every client has the right to minimize their taxes … legitimately
* We apply our knowledge, experience and good judgement to get the best
possible results for every client
* 63% of our new clients have been referred by existing clients … so we
must be doing something right !
* As you see from our clients’ testimonials (www.focused.biz/testimonials),
we strive to help every client feel comfortable and confident in the end-result
* We are pro-active, spending time with each client to plan for the future
5. Client hadn’t filed a tax return in
yearssides to these situations:
There are 2
* Often, employees who catch on filings end up getting refunds. Why leave your
money with Canada Revenue Agency?
* Others who owe money are also faced with accrued interest and penalties. One
recent client owed only $700 … but the penalty was $2,500 because she filed late
every year, and frequently omitted important information
We work with new clients to catch up on all of their tax returns. In certain
situations, we can file a Voluntary Disclosure Application to request that penalties
and interest be waived.
6. Errors from hand-written returns
Our new client has been doing his own tax returns by hand, which is fine in
most circumstances. In his case, the CRA miss-keyed his RRSP contribution
by entering $50,000 instead of the $5,000 that the client reported (and was
confirmed by RRSP contribution slips submitted with the tax return).
The CRA sent out notices that the client had over-contributed to their RRSPs
with a penalty of 1% per month until the situation was resolved. Given that
this error occurred 3 years ago, the penalty was $18,000, and the CRA
wanted payment.
The client had no idea what all this meant. We reviewed the
returns, discovered the error, called the CRA and got everything corrected
and the penalties reversed. The CRA agent said they have seen quite a few
errors of this kind … what ?
7. Moving Expenses
Our client moved from Alberta to BC, incurring quite a bit of costs in the
process. He prepared his own tax return, including the T1-M schedule to
claim the moving expenditures as a deduction. The result was a
refund, which the CRA paid to him. When the CRA looked back on the return
many months later, the disallowed 100% of the claim, insisting that he now
pay back the refund; unfortunately, he had already spent the money.
Moving expense claims are often reviewed by the CRA. If prepared
carefully, following the guidelines, they present a meaningful deduction, and
rightly so. The problem with our new client’s original claim was that he did not
earn income in the new province. We submitted an adjustment to the original
return to carry-forward the moving expenses to the following year, when he
was able to use the full deduction.
9. Summary
1.
Employment Expenses
2.
Fitness and arts tax credits for children
3.
Transit passes
4.
Optimizing deductions with your spouse
5.
Equivalent to spouse exemption
6.
Tuition
7.
Moving expenses
8.
Home buyers plan (RRSP)
9.
Income splitting
10.
Disability Tax credit
11.
Premiums on group health benefits
12.
Interest paid
10. Employment Expenses
If your employer requires you to incur certain expenses for which you will not
be reimbursed, you may be able to deduct part or all of those expenses
against your employment income.
The employer must complete and sign a form T2200 (Conditions of
Employment).
Examples include vehicle expenses (gas, insurance, repairs, parking and
depreciation), telephone, internet, home office (part of your rent, utilities and
insurance), supplies, fees for an assistant, tools and more.
11. Fitness and arts tax credits for children
Parents may claim up to $500 per child for a fitness programs AND up to
$500 per child for arts programs and self-development.
You must keep receipts in order to qualify.
12. Transit passes
You can claim as a deduction 100% of monthly transit passes, provided that
you were not reimbursed for same.
If your employer paid for the transit passes, then they will report that amount
under Box 84 of your T4 slips, which is deductible.
You may share and/or transfer part or all of these deductions to your spouse.
13. Optimizing deductions with your spouse
We meet quite a few new clients who prepare their taxes separately from
their spouse, whether married or common law.
There are many advantages to linking the returns through professional tax
software, before filing the taxes (individually).
Various deductions can be shared and/or transferred between spouses
including medical expenses, donations, transit passes, the child tax
credit, fitness and arts amounts and childcare expenses, tuition and even
splitting of pension income.
This makes it easier to minimize the family tax bill (or maximize the refund).
14. Equivalent to spouse exemption
Single parents with children (under 18) may be entitled to claim an exemption
that would be equivalent to having a dependent spouse.
There are quite a few criteria, but it is worthwhile investigating your eligibility.
We have noticed quite a few single parents are not aware of this exemption
15. Tuition
To claim tuition, the student must have completed part-time or full-time
studies at an accredited educational institution. Details will be provided by
that institution by way of a T2202 or TL11 slip.
In addition, students are given an educational deduction and a textbook
deduction (no receipts required) based on the number of months of part or full
time attendance.
If the student does not earn sufficient income to take advantage of these
deductions in the same year, they can either transfer up to $5,000 to a parent
or spouse … or carry-forward the amount to be used as a deduction in future
tax returns. To transfer tuition, the student must first file a tax return, including
the information about the transfer; only then can the transferee claim the
deduction.
16. Moving expenses
If you move at least 40 km closer to your work or to become a full-time
student, you may be able to deduct part of all of certain qualified moving
expenses, e.g. transportation and storage costs, some travel expenses,
temporary living expenses, costs to maintain old residence, and other
incidental expenses. It is extremely important to keep all of your receipts, as
these claims are often reviewed by the CRA.
The claim is made using schedule T1M, which requires quite a bit of detail,
including your old and new addresses, the name and address of your (new
employer) and the income that is related to this move. Please note that if you
moved for employment (or self-employed), you must have enough reportable
income in that year or you will not be able to use this deduction; however, you
should still complete the form and carry forward the moving expenses to the
next year, when you may be able to use the deduction.
17. Home buyers plan (RRSP)
You can withdraw up to $25,000 from your RRSPs to buy or build a home in
Canada, without incurring withholding taxes, or paying income taxes on the
withdrawal.
You must repay this back into your RRSP within 15 years, with a minimum
annual repayment of 1/15th of the original amount withdrawn.
You can achieve the repayment by contributing to your RRSP, but you won’t
get a deduction for the contribution. If you fail to make the repayment
(contribution), the minimum payment will be added to your taxable income,
thereby increasing your taxes.
We frequently see new clients who have taken advantage of this wonderful
program, but they have mishandled the repayments and the tax filings related
18. Income splitting
Income splitting is a tax-planning technique designed to shift income from a
taxpayer paying a high rate of tax to another taxpayer within the family unit
paying tax at a lower rate. While one must be careful of the rules, there are a
number of permitted ways of splitting income with your spouse or family
members, including:
* self-employed individuals and business owners can pay a reasonable
salary and/or dividend to their spouse and/or children, subject to certain rules.
* you can re-structure your investment and rental income so that is can be
shared with your spouse or other family members.
* you can split your CPP and your pension income with your spouse.
19. Income Splitting (continued)
* you can make a low interest (2% per year) loan to your spouse, so that
he/she can fund investments the income from which will then appear on their
tax return.
* the higher income spouse can setup Tax Free Savings Accounts of up to
$20K per family member.
* you can contribute to a spousal RRSP, which is particularly effective if the
spouses’ future income will be lower than your own.
* capital losses can be transferred to a spouse so that they can apply them
against capital gains, thereby reducing their taxes
20. Disability Tax credit
The disability amount is a non-refundable tax credit of up to $7,697 that a
person with a severe and prolonged impairment in physical or mental
functions can claim to reduce the amount of income tax he or she has to pay
in a year. A supplement is available for persons under 18 years of age at the
end of the year.
In order to qualify, your physician must complete a form T2201, which then is
submitted to the CRA for approval.
21. Premiums on group health benefits
If you are paying part or all of the premiums on a group benefit plan, you may
include these amounts as medical expenses in your tax return.
22. Interest paid
There are quite a few types of interest payments that are
deductible, including:
* interest on student loans,
* interest on loans used to fund qualified investments,
* part of your mortgage interest if you qualified to deduct home office
expenses (as an employee or self-employed person),
* interest on a line of credit or mortgage used to purchase rental
properties, and interest on funds invested in a business.
To qualify, the taxpayer must reasonably expect the borrowed funds will result
in income, which can include interest, dividends, rents, royalties or business
profits. Capital gains don’t count; they aren’t considered income.
23. Call us today at (604) 558-2234
Or email us at
Larson@focused.biz
Address:
#212 – 640 West Broadway
Vancouver, BC, V5Z 1G4
Randy Larson, B.Comm., CBP
President & Founder
Hours:
Monday – Saturday: 9 am – 6
pm
