Tag Archives: income tax

Tuition credits

If you are in school, you get a tax break in the form of tuition credits. And if you can’t use these credits, you can transfer them to your spouse, your parents or your grandparents.

Step 1: Get a Form T2202 from your college or university.

Step 2: The information from this form must be entered into a schedule 11 on your tax return in order to claim the credits. You will be able to claim both a tuition amount, and a monthly allowance for books, as detailed on the form. (Contact me if you have any questions.)

Step 3: If you can not use the credit (because your income is too low) you can either keep the credit for future years, or transfer it to a spouse, or transfer it to a parent or grandparent up to $5,000. To transfer the credit you must sign the back of your form T2202.

NB. The student is the one who fills out the schedule 11. If you are the person receiving the transfer you do not submit a schedule 11. The only supporting documentation you need is the signed T2202, and make sure you keep this documentation in case CRA requests it.

Read the CRA page on the subject of transferring tuition and education credits.

 

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Claiming your child as a dependent

“Kids. Exactly when do they stop being your dependent?” – mother of a 20 year old still living at home

In this economy, many young people continue to live at home while in university, or receive financial assistance from their parents past age 18. Sadly, for tax purposes, after the end of the year they turn 18, they can no longer be claimed as a dependent on your taxes unless they are disabled or infirm.

In short:

Turning 18- In the year your child turns 18, (unless they are disabled or infirm ) they are a dependent until Dec. 31 of that year. On Jan. 1, as far as CRA is concerned, they are on their own.

Disabled or infirm-If your child is older than 18 and needs ongoing support for medical reasons, you will need to provide a letter from a doctor in order to claim your child as a dependent.

Young earners (under 18)- A single parent who claims the amount for an eligible dependent must deduct the child’s income from the amount that can be claimed.

Attending University – Over 18 years, you can not claim your child as a dependent, but you can claim up to $5000 in tuition credits. See my post on tuition credits for more information.

 

Do I really have to keep all these receipts for 7 years?

“I am trying to cut down on stored paper (and ideally to have none) but would like to have all my business receipts on file for next tax season. I’m wondering – is it acceptable to store the receipts in digital format? For example could I just take a photo of each receipt? And what about the tax return papers that are supposed to be stored for 7 years? Are digital photos good enough in the case of an audit or must I keep all this paper clutter?” – Jesse, Musician

Unfortunately, no, digital files are not currently accepted by the Canada Revenue Agency in the case of audit. The chap I spoke to at CRA insisted that you must keep all your receipts. When you are self employed, it can turn into a pile of paperwork, but a small accordion file for each year is often a good solution. There are bookkeeping apps that photograph your receipts, which you may find helpful when out and about, but you will want to keep the paper originals as a back-up.

And regarding what to save for tax returns: basically your Notice of Assessment, your return and any supporting documents for this year and the preceeding 6 years.

Getting ready for tax filing

Yes, it’s another list. This time it is a checklist to help you get all your paperwork ready for your tax preparer.

tax and wine

Here is a basic list of the information to put together:

a) personal details: name, address, sin, date of birth and marital status (name and sin of partner if common-law or married)

b) information about dependents – birth dates, full names, plus any eligible expenses including childcare, arts and sports expenses (contact me if you need more information about what is eligible)

c) all income information including:
T4, Statement of Remuneration Paid
T4A, Statement of Pension, Retirement, Annuity, and Other Income
T4A(OAS), Statement of Old Age Security
T4A(P), Statement of Canada Pension Plan Benefits
T4E, Statement of Employment Insurance and Other Benefits
T4RSP, Statement of RRSP Income
T5007, Statement of Benefits
T5, Statement of Investment Income
RC62, Universal Child Care Benefit statement
RC210, Working Income Tax Benefit Advance Payments Statement

d) any student loan payments (you should receive a statement which details how much interest and principal were paid off over the year.)

e) Your Notice of Assessment from your most recent tax return

f) Details about any RRSP contributions made

g) Details about any charitable donations made or moving expenses (over 40 km for work or study)

h) Self employed people – see my previous post

i) If you have rental income – hold tight, as I am working on a post about that. In the meantime, contact me for more detail if you need it.

What can I claim as expenses as a self-employed person?

I seem to be making this list over and over again for self-employed people who want to know what they can claim as an expense against their income. Please contact me if you need any clarification about anything listed here, or have questions about other expenses that may be deductible for your business.

  1. Costs of goods bought for re-sale
  2. Materials
  3. Vehicles and equipment bought (assets over 500$) (These will be subject to depreciation calculations. You need to record the total cost and the date the item was purchased. contact me for more information about depreciation.)
  4. Small tools and equipment (under $500)
  5. Subcontractors
  6. Travel expenses
  7. Legal and accounting fees
  8. Advertising and promotion expenses
  9. Telephone bills (cell phone or workplace phone but not a home landline)
  10. Interest and bank and credit card charges
  11. Office supplies
  12. Postage and freight costs
  13. Internet costs (if for business and personal make an estimate of how much business and how much personal)
  14. Meals and entertainment (for the purpose of business they are 50% deductible)
  15. Insurance – business, professional liability (check with me for more clarification regarding personal life and medical insurance)
  16. Business use of home (The easiest way to calculate is if you have a dedicated area of your home that is an office 24/7. In this case you would calculate by square footage what proportion of your total living space is used for business.) This includes: property taxes, mortgage interest, rent,repairs and maintenance, utilities (not including home phone line). NB. If more than one person in a household is self-employed, only one of you can claim these expenses.
  17. Auto Expenses (You are required to log the business and personal use. Contact me for more information about ways to do this, or if you did not do it, other ways that you keep records that may suffice in the mean time. I do encourage everyone to do this for at least one year.) This includes gas, insurance, auto repairs and maintenance and parking.

This list was written off the top of my head and will probably be a work in progress for a little while. It is NOT intended to substitute for information from the Canada Revenue Agency. It is a guide to help you organize your shoebox full of receipts before you meet with  tax professional. anyone filing their own taxes should confirm the information I have given you by referring to the Canada Revenue Agency website.

Love and taxes

People keep asking me when they have to file as common law for tax purposes. Today I called CRA and this is what the friendly phone person told me. You have to file as common law when you have been living together for 12 months or when a couple (who share a home) have a baby together, or share custody of a child.

If you get married or become common law during the year, and you receive UCCB or GST/HST Credits, be sure to let the tax man know or expect to be asked to pay back over-payments.