Tax Efficiency: Sometimes, It Takes a Village

Tax filing season is over for close to 20 million Canadians whose tax returns have already been assessed this year. Of those, 14%, or just under 3 million taxpayers, had a balance due. On average, they owed $3700 upon filing; the rest got refunds (65%) or filed a nil return (21%) to receive refundable tax credits.

Did you miss claiming something? Now is the time—out of the fray—to double check.  Here are some common mistakes taxpayers make in claiming their non-refundable tax credits (found on Schedule 1). You can easily correct by filing an adjustment to your return:

• Spousal amount – gross rather than net income used
  Example >  Your spouse has a small business. The business took in $10,000 last year but expenses totaled $6,000. Your claim for the spousal amount must only be reduced by the $4,000 net income, not the $10,000 income the business grossed.

• Amount for eligible dependants – file when marital status changes
  Example >  Last year you and your spouse separated and each of you was granted custody of one of your children. Although your marital status was married at the beginning of the year, you can claim the amount for ‘eligible dependant’ for the child that lived with you after the separation.

• Caregiver amount – missed claiming for parent or other infirm dependant
  Example >  Your mother moved in with you last year and you supported her. If her income is low enough, you may claim the caregiver amount for her.

• Disability amount – missed claim for sick child
  Example >  Your child was born with a severe disability. You are eligible to claim the disability amount for the child once you get a doctor to sign a disability certificate for the child.

• Tuition, education and textbook credits – missed transfer to parents
  Example >  Your son is a student at university. His income is not high enough to use up his claim for the tuition, education and textbook amount. By having him complete the back of the T2202A form, a portion of the unused tuition, education and textbook amount can be transferred to your return, to a maximum of $5000.

• Amounts transferred from spouse – missed transfer of age credit
  Example >  Your spouse is over age 65 but does not have enough income to use the age amount. By completing Schedule 2, you can transfer the amount that is not needed to your return.

• Medical expenses – missed multiple expenses
  Example >  In addition to the normal doctor’s fees and prescriptions, there are a number of other medical expenses that are often missed, such as private health care insurance premiums, including medical travel insurance and the costs of transportation to receive medical care not available locally.

• Donations – claim on return of one spouse
  Example >  Both you and your spouse make charitable donations. Each of you claims your own donations. By combining the claim on one return, the amount of the claim is bigger because the rate applicable to the first $200 of each claim is less than the rate applicable to claims over $200.

• Instalment payment reduction request missed
  Example >  You received an instalment payment notice from CRA based on your income last year. This year your income will be substantially less. You should not continue to make the instalments based on the prior year income but should recalculate the amount based on this year’s estimated income.

It’s Your Money, Your Life.  Filing an accurate tax return is about what you keep. There are many ways to do a tax return mathematically correctly. Your opportunity is to do the best return for the benefit of your whole family. But if you are not sure you claimed every credit or deduction you are entitled to, turn to your professional advisory team for help without delay. Sometimes, as the saying goes, it takes a village to get the best results. . . .

Evelyn Jacks is President of Knowledge Bureau and author of 50 books on tax and personal wealth management. She is also the founder and director of the Distinguished Advisor Conference (DAC). The theme of this year’s three day think tank in Ojai, CA Nov 10-13 will be “Back to the Future – Collaborative Wealth Management.”  Follow Evelyn on Twitter at @EvelynJacks.