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Tax

Making 'cents' of the new tax law changes

March 16th, 2015 by

Don't let confusion about the new Family Tax Cut leave your money behind

 
 

Just how 'in the know' are you when it comes to your tax return? Every year there are changes and updates to the tax laws. While it is important to have your paperwork in order, there is much more you should know for tax time – understanding what you can claim could help you maximize your refund. 

Last year the Canadian government announced new tax breaks for Canadian families including the new Family Tax Cut.  Do you how it works?  If you said no, you’re not alone.  While it may have been featured in a national advertising campaign, this new tax credit seems to be a source of confusion for many, according to the results of a recent Leger survey for H&R Block Canada.

Although 50 per cent of Canadians had heard of the Family Tax Cut, only 15 per cent said they expected any of the new tax changes (including the Family Tax Cut) to impact their tax return. Unfortunately too, the confusion around the new Family Tax Cut may mean Canadians will be leaving money on the table at tax time.

“The Family Tax Cut will provide the most benefit to families where one spouse earns all the income but that is not the only situation that results in tax savings,” says Caroline Battista, senior tax analyst, H&R Block Canada. “Even a small difference in income between two spouses could result in a few hundred dollars of savings so don’t make the mistake of thinking you do not qualify. You don’t want to miss out and pay more tax than you need to.” 

And when asked to identify situations where families could take advantage of the Family Tax Cut, the survey results were poor. Although 27 per cent identified families where one spouse earns all the income would benefit, when presented with other options that might qualify, there were few correct answers.

Real-world Family Tax Cut examples

The survey asked Canadians to identify which of the following family examples would benefit from the Family Tax Cut:

  • One spouse earns $50,000 and the other earns $40,000
    • Will benefit. Family Tax Cut savings would be $277.
    • Only 10 per cent knew this would qualify.
       
  • One spouse earns $100,000 and the other earns $75,000
    • Will benefit. Family Tax Cut savings would be $484.
    • Only 13 per cent knew this would qualify.
       
  • One spouse earns $80,000 and the other earns $50,000
    • No benefit.  They are both in the same tax bracket.
       

The Family Tax Cut allows couples with at least one child under the age of 18 to claim a non-refundable tax credit equal to the amount that would be realized by transferring up to $50,000 of taxable income from the higher-income to the lower-income spouse or common-law partner. The maximum claim is limited to $2,000.

Know what you're entitled to (or find someone who does)

So, what does this all mean? Battista encourages Canadians to do their homework well in advance of the April 30th tax deadline to ensure you know of every tax credit you are entitled to claim to help reduce your tax liability.  If all of this seems overwhelming to you, work with a tax professional at a local H&R Block office in your area.  They will make the entire process seamless and stress-free and ensure you don’t miss a thing this tax season.  

Tax

What Canadian families need to know for their 2014 tax return

January 21st, 2015 by

Be sure to get your tax information in order before spring fever hits!

 
 

Despite the frigid winter temperatures, spring is around the corner and that means another tax return deadline will be here before we know it.  While we aren’t even a month into 2015 yet, it’s important to get your tax information in order early and understand if any of the recent tax changes affect you and your family. 

Cuts and credits to consider

The new Family Tax Cut, introduced in late 2014, is a new tax measure that allows qualifying families to save when one spouse is in a higher tax bracket than the other, or the lower-income spouse has non-refundable tax credits they can’t fully claim.  Families with children under the age of 18 will be able to claim a non-refundable tax credit equal to the amount of tax savings that would be realized by transferring up to $50,000 worth of income from the higher-earning to the lower-earning spouse (or common-law partner). The tax credit will be capped at a maximum of $2,000.

“This is very good news for many Canadian families; it could mean a little more money in your pocket during tax season,” says Caroline Battista, a senior tax analyst with H&R Block Canada.  “Even if one spouse does not make significantly more than the other, the Family Tax Credit can still result in savings. And when you are raising children, even a few hundred dollars helps with the expenses.”

In addition to this new tax cut, the government has increased the Children’s Fitness Tax Credit  to $1,000 per child and made it retroactive for 2014 – another way to ease some of the stress around tax time and give you a few more dollars back for your active child.

Parents will also see an increase to the Universal Child Care Benefit in 2015. For children under six, the UCCB is now $160 per month. For children from six to 18, the credit is $60 per month. The increases will be paid retroactively in a lump sum in July 2015 and then parents will receive the new monthly amounts. Make sure your child is registered with the CRA.

Be an early bird

Battista encourages Canadians to do their homework and ensure they have everything in place well in advance of the April 30th deadline to ensure you don’t miss a credit or deduction on your tax return.

 

For more information or find an office near you, please visit www.hrblock.ca. With more than 1,200 offices across Canada, H&R Block Canada tax professionals can answer all your tax questions.

Tax

Infographic: 7 tax preparation tips to do before December 31

December 19th, 2014 by

Expecting to owe the taxman? Here's what you can do to lessen the burden...

 
 

With all the holiday hustle and bustle upon us, thinking about your 2014 taxes likely isn't at the forefront of your mind. However, it should be. Especially if you're expecting to owe the CRA.

Here are 7 things to consider before December 31st...

7 tax preparation tips to consider before the end of 2014

  1. Take a bath-on your stocks

If you scored big with a stock or two, you might be able to sell a couple of your losers to help counteract your capital gain. Settle your transactions by December 23.

  1. Get married

If your spouse doesn't work, you can claim them as a dependant for the entire year even if you wait until December 31 to tie the knot.

  1. Have a kid by Dec 31

It may not be possible but if you had a kid in 2014, you can claim the child amount for the last time and maybe split income with your spouse.

  1. Go on a shopping spree

If your business boomed, you may want to buy a few things for the office to help reduce your income. Or buy nicer holiday gifts for your clients.

  1. Get your kids off the couch

The feds recently doubled the Children's Fitness Credit to $1,000 and made it retroactive for the year. Claim receipts now for activities in the new year.

  1. Be nice

Depending on where you live, you can receive a tax credit for up to 50% on charitable donations. First time donors get an even bigger break. Donate more than $200 to get the most bang for your buck.

  1. Buy a cow

Yes, you can deduct cows against your income but you need to be a farmer.

Tax

You want to claim WHAT on your taxes?

March 20th, 2014 by

The most interesting tax claims Canadians have made...

 
 

We’ve all heard the saying: the only things certain in life are death and taxes. While we may not have much control over the former, we can take steps to reduce our tax bills. But how far would you go to save a few dollars in taxes? Some taxpayers have been very creative in trying to justify tax deductions. While some attempts were rejected, many others were approved by the Tax Court.

Cleo Hamel, senior tax analyst with H&R Block Canada, shares what worked and what didn’t with these unusual deductions...

Accepted

  • Spousal amount for widows 

If a widow remarries immediately after her husband dies, the spousal amount can be claimed by the new husband and on behalf of the deceased husband. CRA Views 2003-0050255

  • Cat and dog food

While you can’t usually claim pet food, a farmer was allowed to claim cat and dog food because it was for outdoor pets acquired to keep wildlife away from the blueberries. Zeitz v. The Queen [2002] 4 C.T.C. 2292

  • Golf is not an employment expense if you hate it

A Canadian executive successfully argued that the golf membership paid by his company was not a valid employment expense because he hated playing golf. Rachfalowski v. The Queen [2008] TCC 258

  • Diamonds are a girl’s best friend

A stripper was allowed to keep nearly $2 million in gifts from a happy customer despite the fact that the CRA argued the gifts were income. The Tax Court ruled they were indeed gifts. Landry v. The Queen [2009] TCC 399

  • Additional food needed by couriers

The Federal Court of Appeal ruled the additional food required by a foot and transit courier because of the extra energy he expended could be claimed as a business expense. Scott v. The Queen, 98 D.T.C. 6530

Rejected

  • Income Tax Act incomprehensible

Arguing that the Income Tax Act is difficult to understand is not a valid defense when charged with failing to file an income tax return. R. v. Meikle [2003] 4 C.T.C. 294

  • Haircuts

Even if your job requires you to be well-groomed and get a haircut regularly, the cost of the cuts is not deductible against your employment income. Rouillard v. The Queen [2000] 4 C.T.C. 2065

  • Ballet lessons

While the cost of your child’s ballet lessons does qualify for the Children’s Arts Credit, it cannot be claimed as a childcare expense. Levine v. The Queen [1996] 2 C.T.C. 2147

  • Trips to Vegas

Even if your doctor recommends trips to warmer climates to help with a skin condition, the cost of trips to Las Vegas and Arizona cannot be claimed as a medical expense. Goodwin v. The Queen [2001] 4 C.T.C. 2906

  • Gambling as a business

A lawyer turned professional gambler had more than $100,000 in losses disallowed as a business expense because he could not prove he had an actual business plan. Cohen v. The Queen [2011] TCC 262

Need a little help?

If you need some guidance on what you can and cannot claim, consider using an online program like H&R Block’s Tax Software (www.hrblock.ca), which will walk you through step-by-step tips to identify every possible deduction or credit, and calculates your return as you go. You can even file one return for free until March 31. If you would rather leave it to an expert, you can drop by an H&R Block office where a tax professional will review your previous returns for free.

Tax

Tax season 101: 5 ways to get the most from your tax return

February 5th, 2014 by

It's time to get serious about your 2013 tax return

 
 

Want to pay less tax? Silly question really - who wouldn’t want to pay less tax? You would be surprised, though, how many Canadians don’t take the necessary precautions to ensure they get everything they are entitled to when it comes tax time.  

Cleo Hamel, senior tax analyst for H&R Block Canada, offers the following tips to ensure you make the most of your 2013 tax return...

5 tips to maximize your return

  1. Do your homework

Missing a credit is like leaving money on the table. Research credits and deductions you may be eligible to claim, including RRSP contributions, employment expenses, charitable donations, tuition and medical expenses. And if you are missing receipts, it is worth the extra time to track them down. Every piece of paper represents a little less tax you have to pay.

  1. File even with no income

There are benefits like the Canada Child Tax Benefit and GST/HST benefit that are calculated based on your last tax return filed. Depending on where you live, you may also be eligible for provincial benefits. You do not need income to qualify for these benefits. But not filing means the benefits will not be paid. Both parents have to file in order to receive the CCTB.

  1. Combine receipts

Married and common-law spouses may be able to pool charitable donations and medical expenses to maximize their tax savings. The same is true with the Transit Pass Credit for families. Parents can claim passes for children younger than 19.

  1. File on time

A tax refund is money you have overpaid the government over the course of the year, so file your return and get it back. The government doesn’t pay interest on the money.

  1. Avoid a refund

Ultimately, you want to owe the government nothing when you file your return. If your situation has changed over the year, ask your payroll department if you can update your TD1 Form to reflect the changes. It may mean every paycheque has a few more dollars in it, because you are not overpaying your taxes.

Where to go for help

Be sure you don’t miss out on any deductions or credits, and avoid paying too much tax. If this seems like a challenging task, H&R Block Canada has offices from coast to coast where tax professionals can help with all your tax needs. For those who prefer to take care of their own taxes, H&R Block Tax Software is a secure and reliable program that ensures you maximize your tax return.

For more information, please visit http://www.hrblock.ca/.