Investigative Tax Prep:  Top Ten Changes to Probe

Evelyn Jacks

Tax season 2025 has started with a focus on the increased income levels some taxpayers may report due to proposed changes in capital gains tax laws.  But aside from this there are new questions to probe with clients to ensure the family’s tax returns are filed to their very best benefit, given change in their life and financial events as well.  Here are top 10 queries to add to your interview checklist:

1. Are there higher income levels, perhaps due to the reporting of capital gains prior to June 25, 2024, a new job or a mandatory RRIF disbursement?   This can bump the taxpayer into the next tax bracket and not only increase regular taxes payable.  Starting in 2024, find out whether the newly minted Alternative Minimum Tax will apply. 
2. What Were the Financial Transitions?  Other income sources, due to a transition into a new work opportunity or retirement, can affect eligibility for income-tested refundable and non-refundable tax credits or net cash flow when quarterly instalment payments must be made for the first time in the new tax year.  Prepare your clients for this.
3. What is the Effect of New Government Benefits?  For example, receiving $10 a day daycare, can increase net income (as child care expense deductions may decrease) and this in turn decrease refundable tax credits like the Canada Child Benefit for some taxpayers.  If pandemic benefits, like CERB had to be repaid, this will decrease net income as well.  
4. Was There Health Change?  The onset or resumption of disability (long COVID or a new cancer diagnosis) can affect employment or self-employment income levels, home ownership changes, caregiver costs, and how these changes contribute to the use of the multi-generational home renovation tax credit, and a number of home-related and medical provisions. 
5. Should Application Be Made for New Disability Benefits?  With the onset of disability find out whether or not a client qualifies for CPP Disability Benefits.  Also, will the taxpayer qualify for the new Canada Disability Benefit starting in July of 2025?
6. Does the Client Qualify for Employment Insurance Benefits?  Will transitions into retirement, a pink slip or a resignation lead to the claiming of EI (Employment Insurance) benefits, and potentially an EI clawback.  Will an RRSP contribution help?  Or perhaps the relationship with CRA will change with a new micro business or “side hustles”.  Ask about this and then inform your client if Form T2125 Statement of Business or Professional Activities should be filed for the first time this year.  
7. Is the Net Worth Statement Up to Date?  Has the client’s financial or business portfolio experienced increased or reduced asset valuations and/or business activity, or a business closure, sale or bankruptcy in the past year?  How this affects the individual and family tax filing process?  Have you covered off on any interest deductibility for tax deductible debt?
8. Were There Any Real Estate Windfalls and/or Potential Expense Deductibility Restrictions?  The windfall of an unexpected but quick residence sale could result in business income reporting on Form T2125 Statement of Business or Professional Activities for the first time this year due to the anti—flipping rules federally and in certain provinces, rental expenses may be entirely restricted for short term rentals if the property didn’t meet local licensing or compliance rules.  
9. Can We Clean Up Bad Investments?  The review of “worthless securities” lingering from the past difficult years, may uncover potential write offs in the tax year with the opportunity to apply losses to current or prior year capital gains to generate new refunds
10. What are the Changes in Adjusted Cost Bases of financial assets, especially identical shares?    

Bottom Line: Tax and financial advisors who think through their interview processes to include tax change are rock stars – they really add value to the relationship with clients!