Even Low-Income Taxpayers Need Professional Help

This heartwarming piece from Knowledge Bureau Master Instructor, Walter Harder, DFA-Tax Services Specialist™, comes with a challenge to advisors.

One of the things I do to give back is to volunteer tax preparation services to low-income newcomers and seniors through a local charitable organization. Many of the returns are quite simple, but without the knowledge of a professional preparer, many of these taxpayers could be paying a whole lot more in taxes.

Last week, for example, a gentleman came to me to have his return prepared. His wife had passed away late in 2014. I had prepared their returns for that year. Both spouses were seniors and were receiving the Guaranteed Income Supplement as their incomes consisted of Old Age Security and a Canada Pension Plan retirement benefit well below the maximum.

Early in 2015, the taxpayer received a CPP death benefit of just over $2,000, which he used to fund his wife’s burial. His income was so low that he was not taxable, so at first glance it looked like adding the death benefit to his income would be the best option. After all, why prepare an estate return and then have to pay more than $400 in taxes on the death benefit? Most CRA volunteers would take that route.

However, I had to consider the consequences of adding $2,000 to income for a senior receiving the supplement. His supplement would be reduced by about $100 per month for 12 months starting in July. That’s a cost of $1,200 to a senior who has barely enough to live on, even with the larger Supplement. Although the $400 tax bill for the T3 return stings, it’s still better than the $1,200 loss in Supplement payments.

I challenge my fellow tax preparers to give back and donate their professional services to those members of the community who cannot afford to pay for professional tax assistance. Even one afternoon or evening a week during tax season can make a big difference in the lives of these individuals.

Walter Harder, DFA-Tax Services Specialist™ will travel with Knowledge Bureau at the Distinguished Advisor Workshops this May 24-31.  Be sure to come out to share knowledge with us. Register now.

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