Tax Tips Archives

CRA Tax Tip: Save the stamp, save the time – pay online!

The following Tax Tip is available from the Canada Revenue Agency.

Did you know…

That you can quickly and securely send a payment to the Canada Revenue Agency (CRA) from your bank account?

The CRA's new My Payment service simplifies the process of making a payment to the CRA. This service can help anyone—from a business submitting its goods and services tax/harmonized sales tax (GST/HST) instalments, to an individual making a payment toward a personal income tax amount owing. Now you can click your way to instantaneous payments—no more accounting for outstanding cheques, no more concerns over mailing time. This is an instant and immediate payment!

For more information on this or other CRA tax tips, see:
http://www.cra-arc.gc.ca/nwsrm/txtps/2009/tt091124-eng.html

CRA Tax tip: Self-correct misallocated payments

The following tax tip is available on the Canada Revenue Agency Web Site:

Did you know...

You can use My Business Account to transfer payments and credits within your goods and services tax/harmonized sales tax (GST/HST), corporation income tax, excise tax, excise duty, excise tax on insurance premiums, air travellers security charge, and softwood lumber products export charge accounts? "Transfer Payment" allows you to transfer amounts from one interim period to another or pay an amount owing.

If you have an amount available for transfer, you can select the "Transfer Payment" option under "Account balance and activities," submit and confirm the transfer details, and see the updated account balance and interest amounts immediately. If the amount you want to transfer has already been applied to an assessed period, you can request a transfer through My Business Account's "Make online requests" service.

My Business Account provides secure, convenient access to your business accounts seven days a week. Go to www.cra.gc.ca/mybusinessaccount and see what other services may be useful to you.

Think green, act green!

For more information on this or other CRA Tax Tips, visit:
http://www.cra-arc.gc.ca/nwsrm/txtps/2009/tt091013-eng.html

CRA Tax Tip: The Home Renovation Tax Credit

The following tax tip on The Home Renovation Tax Credit is available on the Canada Revenue Agency Web Site.

Did you know ...

That as a construction business owner, contractor or retailer, you can make a difference by making your customers aware of the Home Renovation Tax Credit (HRTC)?

The HRTC is a temporary non-refundable tax credit for eligible home renovation expenditures for work performed or goods acquired, after January 27, 2009, and before February 1, 2010, in respect of an eligible dwelling. It was announced in the Canada’s Economic Action Plan to revitalize the Canadian economy by encouraging home owners to make renovations and receive a tax credit of up to $1,350.

Help your customers by providing them with the documentation they need to support their HRTC claims. Agreements, invoices, and receipts, must clearly identify the type and quantity of goods purchased or services provided, including, but not limited to, the following information:

•information that clearly identifies you as the vendor/contractor, your business address and, if applicable, your goods and services tax/harmonized sales tax registration number;
•the date the goods/services were purchased or provided;
•a description of the work performed including the address where the work was performed; and
•the amount paid.
In case customers have questions on the HRTC, the Canada Revenue Agency has HRTC information that you can download, print, and hand out to your customers. The materials provide a brief overview of the HRTC and additional links should your clients want more detailed information. They can be downloaded at www.cra.gc.ca/hrtc.

For more information on this or other CRA tax tips, visit:
http://www.cra-arc.gc.ca/nwsrm/txtps/2009/tt090916-eng.html

CRA Tax Tip: GST/HST tax filing: quick and easy

The following tax tip is available from the CRA web site:

Did you know... That you can file your goods and services tax/harmonized sales tax (GST/HST) return electronically from your home or office?

Eligible registrants can use the access code from their personalized return to file returns with an amount owing, a nil balance, or a refund of $10,000 or less using GST/HST NETFILE, GST/HST TELEFILE, or My Business Account.

When you file electronically, do not mail a copy of your return to the Canada Revenue Agency. If you need to pay a balance owing, use your financial institution's Internet or telephone banking service or Form RC158, GST/HST Netfile/Telefile Remittance Voucher, to make your payment.

If you are filing on paper, be sure to include your Business Number and reporting period dates to ensure quick processing of your return. When filing on paper, do not use Form RC158 to make your payment.
For more information on filing your GST/HST return electronically, go to www.cra.gc.ca/gsthst-filing. To access My Business Account, go to www.cra.gc.ca/mybusinessaccount.

Tax tip Seniors - your pension isn't the only benefit

The Canada Revenue Agency (CRA) offers a full range of tax-related services for Canadian seniors. In an online Tax Tip on the CRA web site, seniors can learn about tax benefits, non-refundable tax credits, electronic services, and payment methods.

Benefits
There are a number of tax measures that may be of interest to Canadian seniors. To receive the goods and services tax/harmonized sales tax (GST/HST) credit, you must apply by completing the application area on page 1 of your 2008 income tax and benefit return, even if you received the credit last year. For more information on the GST/HST credit, see Pamphlet RC4210, GST/HST Credit, or go to www.cra.gc.ca/benefits.

To split your eligible pension income between you and your spouse or common-law partner in order to reduce the amount of taxes that you owe, both of you should complete Form T1032, Joint Election to Split Pension Income. Be sure to keep the form in your records if you file electronically, or include it with your paper return.

For more information about tax benefits for seniors, go to www.cra.gc.ca/seniors for more detailed information.

CRA Tax tip: T4 filing - think green, act green

The following tax tip is available from the Canada Revenue Agency and is available in full on the CRA web site.

Did you know…

That you can file your T4 information return electronically from the convenience of your computer?

Be part of the paperless filing solution and eliminate the need to send paper copies of your T4 slips and summary to the Canada Revenue Agency (CRA). File online and receive electronic confirmation that your return has been received by the CRA, and save on printing and mailing costs.

For more information, see:
http://www.cra-arc.gc.ca/nwsrm/txtps/2009/tt090130-eng.html

SRED Tax Incentives - What's New

The Canada Revenue Agency has prepared a What's New page on its web site for information on the Scientific Research and Experimental Development (SR&ED) Tax Incentive Program Support for scientific Research and Development (R&D) in Canada.

The SR&ED program is a federal tax incentive program, administered by the Canada Revenue Agency (CRA), that encourages Canadian businesses of all sizes, and in all sectors to conduct research and development (R&D) in Canada. It is the largest single source of federal government support for industrial R&D.

The SR&ED program gives claimants cash refunds and/or tax credits for their expenditures on eligible R&D work done in Canada.

For information on what's new with the SRED program, please see:
http://www.cra-arc.gc.ca/txcrdt/sred-rsde/menu-eng.html

CRA Tax Tip: More services to simplify your business taxes

The following tax tip is provided by the Canada Revenue Agency:

Did you know...

That you now have additional options to help manage your business taxes through our My Business Account service?

Business owners can now use this secure online service to:

check the status of goods and services tax/harmonized sales tax (GST/HST)* returns and see when Notices of Assessment were issued; and
access a variety of business tax information and services, including account balances and activities.

Starting in November 2008, you will be able to transfer payments and credits within your GST/HST,* corporation income tax, or other levies account. This service will allow you to transfer amounts not yet applied to an assessed period and view the results immediately, including updated interest amounts and account balances. If the amount you wish to transfer has already been applied to an assessed period, you can request a transfer through our Make online requests service in My Business Account.

Business owners can authorize their employees and representatives to view or change their tax information online. Once authorized, the employees and representatives would access the services through Represent a client at www.cra.gc.ca/representatives.

For more information on this tax tip and others, visit the CRA web site at:
http://www.cra-arc.gc.ca/nwsrm/txtps/2008/tt081022-eng.html

Tax tip: It pays to get fit!

The Canada Revenue Agency has provided the following tax tip on its web site to remind Canadians of the $500 fitness credit for children.

Did you know...

That for 2007, you may be able to claim the fees paid for physical fitness programs for your children under the age of 16 at the beginning of the year? 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. Under proposed legislation, if the child qualifies for the disability amount and is under the age of 18 at the beginning of the year, you may be able to claim an additional $500 credit.

For more information on this tax credit for 2007, visit www.cra.gc.ca/fitness.

http://www.cra-arc.gc.ca/newsroom/taxtips/2008/tt080320-e.html

Tax Tip: Are you a newcomer to Canada?

The Canada Revenue Agency provides the following Tax Tip:

Did you know…

That if you are a newcomer to Canada, you may be eligible for credits and benefits such as the Canada Child Tax Benefit, the Universal Child Care Benefit, and the GST/HST credit?

For more information, visit www.cra.gc.ca/individuals and select “N” from the drop-down menu for “Newcomer to Canada.”

For more information on this or other CRA tax tips, please see;
http://www.cra-arc.gc.ca/newsroom/taxtips/2008/tt080208-e.html

Tax Tip: Generosity is rewarding!

Did you know…

That you may be able to reduce your income tax by donating to registered charities? You can verify whether a charity is registered by searching for it in the Canada Revenue Agency (CRA) Charities Listings.

In 2007, the federal tax credit for charitable donations is calculated as 15% of the first $200 of donations, plus 29% of the amount donated over $200. You may also be eligible for provincial or territorial tax credits based on the applicable provincial or territorial rates. You can claim donations made this year, or carry forward any unclaimed donations for up to five years. Married or common-law couples can pool their donations and claim them on one return.

The CRA advises Canadians to be aware of certain charitable donation schemes being promoted about which the CRA has issued numerous warnings. For more information, visit www.cra.gc.ca/newsroom/alerts/2007/a070813-e.html or www.cra.gc.ca/donors.

CRA Tax Tip: Cool cash for your tools!

Did you know…

That if you are a tradesperson (including an apprentice mechanic) you may be able to deduct part of your tool expenses? The tradesperson’s tools deduction provides employed tradespersons with an annual deduction of up to $500 to help cover the cost of new tools necessary to their trade. The deduction to be claimed on the 2007 tax return applies to the total cost of eligible tools in excess of $1,000 acquired by an employed tradesperson during 2007.

For more information on the tradesperson’s tools deduction, visit www.cra.gc.ca/individuals and select “T” from the drop-down menu for “Tradesperson’s tools deduction.”

For more information on this or other CRA Tax Tips, see:
http://www.cra-arc.gc.ca/newsroom/taxtips/2008/tt080128-e.html

CRA Tax Tip: Apprenticeship job creation tax credit

Did you know...

That businesses with an eligible apprentice may be able to claim the apprenticeship job creation tax credit? This is a non-refundable tax credit equal to 10% of the eligible salaries and wages payable to eligible apprentices for employment after May 1, 2006. The maximum credit is $2,000 per year for each eligible apprentice.

For more information about the credit, visit cra.gc.ca/individuals and select "A" from the drop-down menu for "Apprenticeship job creation tax credit."

For more information on this or other CRA Tax Tips, see:
http://www.cra-arc.gc.ca/newsroom/taxtips/2008/tt080128a-e.html

CRA Tax Tip - Service Complaints

The following tax tip is available from the Canada Revenue Agency web site.

Did you know that...

The Canada Revenue Agency has introduced a new complaint resolution process? If you have a service-related complaint that has not been resolved through our normal channels, you have the right to make a formal complaint about mistakes, undue delays, poor or misleading information, or staff behaviour through CRA – Service Complaints.

For more information, visit the Canada Revenue Agency Web site at cra.gc.ca/complaints.

For more information on this or other CRA tax tips, see:
http://www.cra-arc.gc.ca/newsroom/taxtips/2008/tt080128b-e.html

CRA Tax Tip: The age amount has increased

The following tax tip was provided by the Canada Revenue Agency.

Did you know…

That if you were 65 or older on December 31, 2007, and your net income was less than $65,449, you can claim the age amount? You may also be able to transfer unused portions of the age amount to your spouse or common-law partner.

For more information, visit www.cra.gc.ca/individuals and select “A” from the drop-down menu for “Age amount.”

CRA Tax Tip: Pension Income Splitting

The Canada Revenue Agency has provided the following Tax Tip on its web site.

Did you know...

That you could benefit from the new pension income splitting tax measure? When you and your spouse or common-law partner file your 2007 income tax returns, new tax rules allow eligible taxpayers to allocate up to half of their eligible pension income (income that qualifies for the pension income tax credit) to their lower-earning spouse or common-law partner.

To make this election, you and your spouse or common-law partner must each complete Form T1032, Joint election to split pension income.

For more information on pension income splitting, visit www.cra.gc.ca.

Tax Alert Warning: Investing in schemes that promise you tax-free withdrawals from RRSPs and RRIFs could result in you losing your retirement savings

According to a tax alert issued by the Canada Revenue Agency, the CRA is finding an increasing number of questionable Registered Retirement Savings Plan (RRSP) and Registered Retirement Income Fund (RRIF) tax-free withdrawal schemes. As such, the CRA is warning Canadians that "investing in such schemes could result in you losing your entire retirement savings to unscrupulous promoters and in a reassessment of your tax returns."

Stats and Facts
- To date, the CRA has reassessed over 3,100 taxpayers who participated in these schemes resulting in additional taxable income of approximately $144 million.
- Audits of another 1,800 taxpayers with $84 million in RRSP and RRIF investments are currently underway.
- Audits on other arrangements are about to begin.

Questionable RRSP/RRIF schemes
Taxpayers should avoid schemes that promise the following:

- Withdrawal of funds from an RRSP or RRIF without paying tax. Promoters often promise to return part of the taxpayer's investment by offshore debit or credit cards, offshore bank accounts, or loan-back arrangements;
- Immediate access to assets in “locked-in” RRSPs or RRIFs;
- Income tax deductions of three or more times the amount invested in an RRSP;
- Unrealistic returns on investments.

For more information on this tax alert, please see the CRA web site at:
http://www.cra-arc.gc.ca/newsroom/alerts/2007/a071129-e.html

Tax Alert: Email Fraud Alert

The Canada Revenue Agency is warning Canadians about email fraud. According to the CRA, "numerous individuals are receiving emails that are falsely identified as coming from the Canada Revenue Agency (CRA) confirming the registration of a complaint case. This email is not from the CRA." The fraudalent emails pertain to complaints made to the CRA by individuals about identity theft.

The web links within the fraudulent email contain harmful software. If you receive this email, you should delete it. The CRA has already notified the proper authorities of this illegal activity.

A copy of the fraudulent email, which identifies individuals by name, is included on the CRA web site to help you better identify the scam.

For more information, including a sample of the fraudalent email, please see:
http://www.cra-arc.gc.ca/newsroom/alerts/2007/a071119-e.html

CRA Tax Tip: Are you a newcomer to Canada?

The Canada Revenue Agency provides the following Tax Tip for newcomers to Canada.

Did you know...

That if you are a newcomer to Canada, you may be eligible for credits and benefits such as the Canada Child Tax Benefit, the Universal Child Care Benefit, and the Goods and Services Tax/Harmonized Sales Tax Credit (GST/HST)?

For more information, visit www.cra.gc.ca/tax/individuals/menu-e.html and select “N” for “Newcomer to Canada” from the drop-down box menu.

CRA Tax Tip: Claiming child care expenses

The Canada Revenue Agency provides the following Tax Tip on claiming child care expenses:

Did you know...

That you can claim child care expenses on your income tax return if your child is cared for at home or in nursery school, daycare, day camps, boarding schools, and sports schools? You can claim these expenses if you or your spouse or common-law partner incurred the expenses in order to work, carry on a business, or attend school.

If you qualify and your child is under the age of 7, you could claim up to $7,000 a year. If your child is over 7 but under 16 years of age, you may be able to claim up to $4,000. There is no age limit if you have a disabled child, and you could be able to claim up to $10,000.

For more information on claiming child care expenses, visit www.cra.gc.ca/tax/individuals/menu-e.html and select “C” for “child care” from the drop-down box menu.

CRA Tax Tip: Tax perks for students!

For more Tax Tips visit the Canada Revenue Agency web site.

Did you know...

That as a student, you may be able to claim a tax credit for the tuition fees you paid for post-secondary level courses you attended during the year? You may also be able to claim an education amount of $400 as a full-time student and $120 as a part-time student for each whole or part month you were enrolled in a qualifying program. In addition, you may be able to claim the proposed non-refundable textbook credit to help with the cost of your textbooks.

You may also be eligible to claim moving expenses, child care expenses, and a tax credit for interest paid on your student loans, as well as the proposed non-refundable tax credit for public transit passes.

For more information on students, visit www.cra.gc.ca/tax/individuals/menu-e.html and select “S” for “students” from the drop-down box menu.

CRA Tax Tip: The easiest way to pay!

The Canada Revenue Agency's Tax Tip for paying personal or business income taxe through your bank:

Did you know...

That you can save time by paying your personal and/or business income tax through your financial institution's telephone and Internet banking services? You can contact your financial institution to find out if you can schedule post-dated payments. You may also be able to file your Goods and Services Tax/Harmonized Sales Tax (GST/HST) return or remit any balance owing through the Canada Revenue Agency's GST/HST electronic data interchange service.

CRA Tax Tip: Community Volunteer Income Tax Program

The Canada Revenue Agency offers the following Tax Tip to Canadians:

Did you know... That the Canada Revenue Agency (CRA) can help you if you're having a difficult time filing your 2006 income tax return? The CRA’s Community Volunteer Income Tax Program offers tax help for people who have a simple tax-filing situation. For tax help, please call the Community Volunteer Income Tax Program at 1-800-959-8281. You can also visit our Web site at www.cra.gc.ca for helpful forms, guides, and other information.

CRA Tax Tip: Everyone benefits from good child care

The Canada Revenue Agency has issued the following Tax Tip:

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)? This benefit is designed to help Canadian families, as they try to balance work and family life, by supporting their child care choices through direct financial support. The UCCB is paid for children under the age of six years in instalments of $100 per month per child. To receive UCCB, complete the Canada Child Tax Benefit application.

For more information about UCCB, visit www.cra.gc.ca/uccb or www.universalchildcare.ca.

CRA Service Options!

The Canada Revenue Agency has provided the following Tax Tip...

"Did you know...

That the Canada Revenue Agency (CRA) offers many convenient and accessible service options such as the toll free telephone network and the Internet? On our Web site, our electronic services provide you with easy-to-use tax filing options, step-by-step instructions, and self-serve convenience designed to make your transactions with the CRA quick and easy.

Our knowledgeable and courteous telephone agents are also ready and willing to assist you. If we are unable to resolve your enquiry over the telephone, we will arrange an appointment for you to see a CRA representative at a time that is convenient for you!"

For more information on this or other CRA Tax Tips, visit the CRA web site at: http://www.cra-arc.gc.ca/newsroom/taxtips/2007/tt070306-e.html

CRA Tax Tip: Save on gas, get your transit pass!

The Canada Revenue Agency (CRA) has issued the following Tax Tip reminding Canadians about the tax credit for public transit passes. Save those transit passes!

Did you know...

That individuals can claim a non-refundable tax credit for public transit passes? You will be able to claim the cost of buying a monthly (or longer duration) pass for commuting on buses, streetcars, subways, commuter trains and local ferries for this proposed non-refundable tax credit.

You can claim the full amount paid for a public transit pass, or for the cost of passes for multiple transit systems, for the amounts you have paid for travel that occurred after June 30, 2006. You can include the cost of passes for yourself, your spouse or common-law partner or your children under age 19.

You will need to keep the expired monthly transit passes for the months after June 2006 to support your claim.

For more information, visit http://www.cra-arc.gc.ca/whatsnew/items/transit-e.html or www.transitpass.ca.

CRA Tax Tip: It's all here!

The Canada Revenue Agency (CRA) has issued a Tax Tip reminding Canadian tax filers about the convenient My Account feature.

"Did you know...

That you can use My Account for individuals whenever and wherever you want to manage your tax and benefit information online? With My Account you can track your refund, check your benefit and credit payments, check your registered retirement savings plan limit, change your address, change your return, and so much more! To use My Account, you have to register for a Government of Canada epass, which includes the mailing of a Canada Revenue Agency security code."

For more information on this tax tip and other tax tips, visit the CRA web site at:
http://www.cra-arc.gc.ca/newsroom/taxtips/2007/tt070212-e.html

CRA Tax Tip: It pays to get fit!

The Canada Revenue Agency has issued a Tax Tip reminding Canadians that starting in 2007 you may be able to claim some expenses for your children's physical fitness programs.

"Did you know...

Starting in 2007, you may be able to claim the fees paid for physical fitness programs for your children under the age of 16? The newly proposed 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."

For more information on this tax tip, visit the CRA web site at:
http://www.cra-arc.gc.ca/newsroom/taxtips/2007/tt070208-e.html

CRA Tax Tip: RRSP Deadline

The Canada Revenue Agency has issued a tax tip reminding Canadians you have until until March 1, 2006 to make contributions to your RRSP for your 2005 income tax return.

For more information on this tax tip or to use the My Account online service to see how much contribution room you have for your 2005 limit, visit the CRA web site at:
http://www.cra-arc.gc.ca/newsroom/taxtips/2006/tt060209-e.html

You can also call the Tax Information Phone Service (T.I.P.S) at: 1-800-267-6999.

UPDATE: Check TAXES.CA for current the RRSP Deadline.

Reduce Your 2005 Taxes

The end of 2005 is almost here, but there’s still time to reduce your 2005 taxes. Here are some ways to do so.

Contribute to your RRSP

If you haven’t yet contributed to your RRSP for 2005, perhaps you should. The earlier you contribute, the more quickly your funds will grow tax-free. You can find out your 2005 contribution room from your 2004 notice of assessment or by accessing "My Account" on the Canada Revenue Agency web site. Your maximum contribution will be the sum of (1) any unused RRSP contribution room from earlier years, plus (2) 18% of income earned in 2004 (usually employment and business income) up to $16,500, less (3) if you participate in a pension plan, any pension adjustment net of any pension adjustment reversal. Be careful not to overcontribute to your RRSP. Overcontributions in excess of $2,000 are subject to a penalty of 1% per month until corrected or until you are in a position to deduct the amount.

If you anticipate your spouse’s retirement income will be less than yours, consider contributing to a spousal RRSP. You will get the deduction for the contribution and your spouse will claim the retirement income when it is converted to a RRIF or annuity. Please note that a spousal contribution is still limited by your RRSP room, not your spouse’s room.

Make a donation

Now is the time to finalize your 2005 donation plans. The combined credit for an individual living in Ontario is 22.05% (16% federal and 6.05% Ontario) of the first $200 of donations paid and 40.16% (29% federal and 11.16% Ontario) of the remainder. Ideally all donations made by married or common-law couples should be claimed by one taxpayer, so as to maximize the amount of claim at the higher rate.

You could consider donating publicly traded shares, especially where there is an unrealized gain. In this situation, the capital gain will be taxed at 25% rather than 50% and the charitable organization will receive more than it would otherwise receive if you were to sell the shares and donate the after-tax proceeds.

Deduct loan interest

For loan interest to be deductible, the loan must be taken for the purpose of earning income from a business or property. It may be possible to reorganize your affairs to make loan interest deductible.

If you live in Quebec, a new rule for 2004 limits the deduction of financing costs related to passive investments to the amount of investment income generated from the investments, including capital gains.

Realize capital losses

If you have realized capital gains during 2005 and you have investments with losses, it may be worthwhile triggering those losses to help offset the gains. Just be careful of “superficial losses” which will result in the capital loss being denied. A superficial loss arises if you, your spouse, or a company you control purchases an identical asset within 30 days prior to or 30 days following the sale of the asset that resulted in the capital loss.

Defer capital gains

If you realize a capital gain on property you disposed of, you may be able to defer part of the capital gain. If you do not receive all of the proceeds of disposition in 2005, you may be able to claim a reserve for all or part of the amount of payments to be received in future years.

If the capital gain will be significant, it may be worthwhile trying to defer the disposition until January 2006.

Use the capital gains deduction

Small business corporation shares and qualified farm property qualify for the lifetime capital gains deduction of $500,000. This is a very complex deduction that interplays with such things as your cumulative net investment loss and whether you have claimed allowable business investment losses in prior years. If you are considering selling such assets, talk to your accountant first.

These are just some suggestions. It’s not too late to reduce your 2005 taxes.

CRA Tax Tip: Paying Electronically

Did you know that you can pay your personal or business income tax through most Canadian financial institutions, including electronically through their telephone and Internet banking services?

Depending on the services provided by the financial institution, you may even be able to schedule post-dated payments. Your financial institution may also provide information as to how to file your GST/HST return or remit any balance owing through the Canada Revenue Agency's GST/HST-EDI service.

For more information, see the CRA Tax Tip at:
http://www.cra-arc.gc.ca/newsroom/taxtips/2005/0412ottawa-e.html

CRA Tax Tip: Missing Slips or Receipts?

The Canada Revenue Agency (CRA) advises you that even if you're missing slips or receipts, you shouldn't hesitate to file your income tax return. Filing on time will help to avoid any disruption of benefits owed to you such as the sales tax credi or Canada Child Tax Benefit.

For whatever reason, if you do not have all necessary information by the filing deadline, the CRA suggests that you use your pay stubs, bank statements, or other records to estimate your income and deductions. If you later determine that the information on your slips is different from your estimates, you can then send the information to the CRA for adjustments to your return. Alternatively, you can also log on to the CRA's My Account feature and use the "Change my return" option to make the changes yourself.

For more information on this tax tip, see:
http://www.cra-arc.gc.ca/newsroom/taxtips/2005/0329ottawa-e.html

CRA Tax Tip: Doing it all online

The Cananda Revenue Agency provides tax tips on its web site. A recent tax tip identifies the convenience and benefit of doing everything tax-related online from your computer.

"My Account is a fast, easy, convenient, and secure way to manage your income tax information, Canada Child Tax Benefit and goods and services tax/harmonized sales tax credit information, and more."

To view this CRA Tax Tip go to:
http://www.cra-arc.gc.ca/newsroom/taxtips/2005/0322ottawa-e.html

To use the My Account feature you can log on via the CRA Web site and clicking on My Account. For more information on My Account, visit the Canada Revenue Agency Web site at: http://www.cra.gc.ca/myaccount/.

There are also numerous tax preparation software packages that are available and approved by CRA for filing your taxes both online and offline. For more information on tax filing software available for your computer, see the Taxes.ca list of tax software and read reviews on our blog. You can even write your own reviews!

CRA Tax Tip: Tax Savings for Learning

The Canada Revenue Agency has released a new tax tip directed at students as well as workers who acquire or improve their work skills. Studens can claim the tuition fees paid to a university or college in Canada for courses takenat the post-secondary school level. Tuition fees paid for courses to acquire or improve skills in an occupation can also be deducted if Human Resources and Skills Development Canada (HRSDC) certified the institution.

For more information on this tax tip including more information on the federal non-refundable tax credits for education amounts, see the CRA web site at:
http://www.cra-arc.gc.ca/newsroom/taxtips/2005/0315-e.html

Donations

While we generally donate to charities because we want to help others, there are tax incentives we should be aware of and make use of. In order to do so, we also have certain responsibilities in respect of such donations.

A charitable donation is a "voluntary transfer of money or property without any expectation of return". It may be in the form of cash or a gift in kind such as securities, certified cultural property, life insurance policies, real estate, residual property, etc. Donations may also be made at the time of death via the taxpayer's will. A gift in kind is generally valued based on its fair market value at the time of disposition. There are special rules for donating capital property, in particular the ability to select a value between the cost and the fair market value. Despite the need for and importance of volunteers, volunteering one's time or services does not qualify for tax credits.

The donor is responsible for ensuring the recipient of the donation is a qualified donee. Qualified recipients include:
- Canadian Registered Charities;
- Certain universities outside Canada;
- Registered Canadian amateur athletic associations;
- Tax exempt housing corporations resident in Canada that only provide low-cost housing for seniors;
- Canadian municipalities;
- Certain gifts to Canada, a province or a territory;
- Registered national arts service organizations;
- The United Nations or its agencies; and
- Charitable organizations outside of Canada to which the Government of Canada made a donation in the tax year, or in the previous tax year.

Individuals who make charitable donations are entitled to a federal tax credit at a rate of 16% on the first $200 of donations and 29% for donations in excess of $200. For most provinces and territories, the tax rate that applies to the lowest income bracket will apply to the first $200 of donations and the rate that applies to the top income bracket will apply to donations in excess of $200.

Qualifying donations are generally limited to 75% of an individual's net income for the year, plus 25% of capital gains from gifts and 25% of recapture from depreciable property gifted. The 75% limit is increased to 100% in the year of death.

Each form of donation has different tax implications for both the donor and the donee. Cash is the most commonly-used form; but the donation of securities may be a preferable option for some donors. The federal government has cut in half any capital gains owed on donations of qualifying securities (generally meaning a security listed on a stock exchange and mutual funds). If the donor is already planning to sell such securities and donate cash, it could be beneficial to donate the securities directly. The donor would be taxable on 1/4 of the capital gain (rather than 1/2) and the value of the donation itself would not change.

Tax credits for donations made may be claimed in the year of donation or carried forward up to five years. For some, it may be worthwhile accumulating donations so as to minimize the 16% federal credit (on first $200 of donations) and maximize the higher credit. It is also advisable for spouses to combine their donations and claim them all on one return. If reported separately on their respective tax returns, each must exceed $200 before obtaining the higher tax credit. By claiming together on one return, that $200 at 16% occurs only once.

To obtain general information on donating, including a feature to search the listing of Canadian Registered Charities, check the Canada Revenue Agency's Charities Directorate page.

Caren MacLeod
Scott Rankin & Gardiner
www.srgg.com

CRA Tax Tip: Child care

Canada Revenue Agency has added the following tax tips to its web site.

Canadians are reminded that you may be eligible to claim payments for child-care expenses such as nursery school, day-care, day camps, boarding schools, and sports schools. Expenses can be claimed if you or your spouse incurred the expenses in order to work, carry on a business, or attend school.

Also, if your child is under the age of 18 and works part time or full time, he or she may be entitled to a refund on taxes withheld. There is even a benefit to filing wether tax has been withheld or not. Filing an income tax return to report the income earned will increase your child’s RRSP contribution limit for future years.

For more information, see the CRA web site at the following addresses:

Tax tip: Claim the care for your kids
http://www.cra-arc.gc.ca/newsroom/taxtips/2005/0222kids-e.html

Tax tip: Cheque for your child
http://www.cra-arc.gc.ca/newsroom/taxtips/2005/0308child-e.html

You Could Have US Tax Issues

If you spend a significant amount of time in the United States, own rental property in the US, do business in the US, or are a US citizen or "Green Card" holder, then you need to be sure you’re onside with any required US filings. While compliance often does not result in US taxes owing and may simply consist of filing a single form, penalties for non-compliance are severe.

Are you a snowbird? You must keep track of the number of days you spend in the US (including travel days). The US Internal Revenue Service (IRS) will consider you a US resident if you meet the "substantial presence test", which is a formula calculated based on the number of days you were in the US in the current year, the preceding year and the second preceding year. Unlike the 183-day misnomer, if you spend, on average, 4 months per year or more in the US then you may meet the test and be deemed a US resident.

You can avoid being considered a US resident by claiming the "closer connection exception". This requires the filing of US Form 8840 to establish that your ties to Canada are closer than those to the US. Such ties include permanent home, family, personal belongings, banking, and participation in social, religious or professional organizations. If you spent more than 183 days in the US in the current year or if you have applied for a Green Card (permanent resident status in the US) then you cannot claim the closer connection exception.

It is possible to be a resident of both Canada and the US – a dual resident. Under these circumstances, we must turn to the "tie-breaker" rules in the Canada-US Tax Convention (treaty) to determine who has ultimate jurisdiction to tax you (i.e. which country you are, in fact, a resident of). If the rules result in Canadian residency, then a US tax return must be filed to report US-source income, while a Canadian return must be filed to report world-wide income. If the rules result in US residency, then the opposite is necessary. Foreign tax credits are used to the extent possible to provide relief from double taxation.

Perhaps you own US real property that you rent out. It is important to elect, in a timely manner, to be taxed as though the income is effectively connected with a US trade or business. Without the proper election, the tenants are obliged to withhold 30% of the gross rent and remit it to the IRS. By making the appropriate election, you can file a US return reporting gross income and deducting expenses to end up paying tax at the marginal rate on the net income – a far better scenario than 30% of gross income.

If you are a US citizen or Green Card holder residing in Canada you are still required to file a US tax return to report your world-wide income. As a Canadian resident you are also required to file a Canadian tax return to report your world-wide income. Again, foreign tax credits are used to the extent possible to provide relief from double taxation. It is also imperative to file your US return in order to not lose the right to claim a "foreign earned income exclusion" and to make certain elections.

Regardless of your filing status, it is important to file when required and to claim any and all treaty exemptions that are available to you, such as electing to defer taxation of any income or gains accrued in a retirement plan, such as an RRSP.

The US also has Estate Tax issues that should be considered. US estate tax arises on the death of an individual and is applied at graduated rates to the fair market value of the individual’s taxable estate. If you are a non-resident, then the estate tax applies only to the value of property in the US. A US citizen or US resident must pay estate tax on their world-wide estate.

Currently US estate taxes are being phased out – the tax rate is being reduced while the exemption amounts are being increased. By 2010, there will be no estate tax; however that may change. Under US legislation, there is a "sunset clause" which essentially means these changes will not apply after December 31, 2010. So, unless further steps are taken, the repeal of the estate tax will last for only one year – 2010. In 2011, the system will revert back to the rules that applied before this phase-out started.

In general, US forms and returns are due April 15 (vs. April 30 in Canada). For US citizens residing outside the US, there is an automatic two-month extension. For non-citizens, it may be possible to request a filing extension. For everyone, regardless of extensions, any tax owing is still due April 15 and subject to interest if not paid on time.

The bottom line is that many people don’t realize they have filing obligations with the US. You may be at risk for severe penalties and lose the ability to rely on tax benefits and treaty protection.

Caren MacLeod
Scott Rankin & Gardiner
www.srgg.com

RRSP Pointers

Deadline
A reminder that today, March 1, 2005, is the deadline for making a deductible contribution to your Registered Retirement Savings Plan (RRSP) for the 2004 taxation year.

Reporting
Please note that contributions made in the first 60 days after the calendar year must be reported on your personal tax return for the previous calendar year (i.e. Jan 1 - Mar 1, 2005 contributions must be reported on your 2004 T1). The reason this is more critical then ever is that the Canada Revenue Agency (CRA) is implementing a "matching program" much like the system they use for the various T-slips. If the total contributions you report, in the remainder of the calendar year and in the first 60 days after the calendar year respectively, do not agree with the information CRA has on file (from the various issuing financial institutions), then you can expect an inquiry, and possibly even an audit, by CRA. For example, if you contributed $5,000 on February 28, 2005 and $10,000 between March 2 and December 31, 2005, you cannot report $15,000 of contributions in the remainder of 2005 as this will not agree with the $10,000 CRA has on record.

So, it's very important you report the contributions in the correct taxation year, regardless of whether you can, or want, to take the RRSP deduction in that year.

Key Strategies
I encourage you to read the February 8, 2005 article "RRSPs: Key Strategies" written by Daniel Saikaley of CIBC Wood Gundy. This article, which can be accessed on this website, provides some excellent RRSP tips.

Caren MacLeod
Scott Rankin & Gardiner
www.srgg.com

CRA Tax Tip: Getting help filing tax returns

The Canada Revenue Agency has released a tax tip reminding Canadians that help is available for filing your tax return:

"If you are a student, senior, person with a disability, a newcomer to Canada, or a low-income earner with a simple tax-filing situation, you can contact the Community Volunteer Income Tax Program (CVITP) at: 1-800-959-8281 to ask for help. CVITP volunteers work with members of local community organizations who can help you complete and file your return."

For more information, see:
http://www.cra-arc.gc.ca/newsroom/taxtips/2005/0217help-e.html

CRA Tax Tip: Claiming transport costs for medical treatment

Canada Revenue Agency has released a new tax tip on its web site reminding Canadians that you may be eligible to claim transportation travel costs relating to medical treatment unavailable where you live.

"To claim transportation costs, the place where the treatment is received must be at least 40 kilometers from where the patient lives. To claim additional travel costs such as meals and lodging, the place where the treatment is received must be at least 80 kilometers from where the patient lives."

For more information, see:
http://www.cra-arc.gc.ca/newsroom/taxtips/2005/0215medical-e.html

CRA Tax Tip: Home tax deductions for the self-employed

As a self-employed individual running your business out of your home or apartment may allow you to deduct a corresponding part of your operating costs, such as utilities. Furthermore, any specific expenses that are directly related to the business are also deductible.

For more information, including conditions and rates, see the CRA web site:
http://www.cra-arc.gc.ca/newsroom/taxtips/2005/0211home-e.html

CRA Tax Tip: Charitable Donations

The Canada Revenue Agency issued a new Tax Tip on its web site today reminding Canadians about the tax credit benefits of making charitable donations.

"You get a 16% federal tax credit on the first $200 of charitable donations, and you get a 29% federal credit for donations of more than $200 (provincial and territorial rates vary)."

For more information see:
http://www.cra-arc.gc.ca/newsroom/taxtips/2005/0208help-e.html

Interest Paid on Student Loans Deductible

As of 1998 interest paid on a student loan has qualified as a tax credit. To be eligible to claim the interest paid on your loan in 2004 or the preceding 5 years, you must have received the loan under
the Canada Student Loans Act, the Canada Student Financial Assistance Act, or a law of a province or territory governing the granting of financial assistance to students at the post-secondary level.

You can not claim interest that you have already claimed but amounts you do not claim this year can be carried forward to any of the next five years. Only you can claim the interest paid on your student loans even though someone other than you (such as a parent) may have paid it.

For more information see the CRA web site for information on completing line 319 of your 2004 tax return:
http://www.cra-arc.gc.ca/tax/individuals/topics/income-tax/return/completing/deductions/lines300-350/319-e.html

CRA Tax Tip: Deducting Moving Expenses

The Canada Revenue Agency posted a new tax tip on its web site today reminding Canadians that moving expenses may be tax deductible.

If you move within Canada to start a new job or business, some of your moving expenses may be deductible from the income you earn in the new location. Expenses that can be deducted include hiring movers or renting vans to move, furniture storage, meals and lodging for you and your family, and the cost of breaking a lease or selling your home. Expenses are deductible from the income earned at the new location in the year you move. Expenses that are not claimed in the year of the move can be carried forward and claimed in years after you move against income earned at the new work location.

For more information see:
http://www.cra-arc.gc.ca/newsroom/taxtips/2005/0202moveon-e.html

CRA Tax Tips

Did you know that Canada Revenue Agency provides Tax Tips on its web site? For instance, this month they released advice on claiming your medical expenses.

"You can claim, as a non-refundable tax credit, medical expenses for yourself, your spouse or common-law partner, and your children born in 1987 or later. For 2004, the total expenses have to be more than 3% of your net income, or $1,813, whichever is less."

For more information on CRA Tax Tips, visit:
http://www.cra-arc.gc.ca/newsroom/taxtips/menu-e.html