Tax Tips to Remember 2017

Now that RRSP Season is over (for fiscal year 2016), here are some Tax Tips to help you get your returns completed, and in to the CRA.

Some Simple Tax Tips

Tax Tips

Income Tax Time 2017

Every year there are nuances and changes to the tax world. However, there are also tried and true tax tips that you need to remember most every year.

  1. Do you have every single form that you need? Most of us need a T4, but what about other forms?
    • T5 for investment income
    • T2201 if you have tuition and post-secondary costs
    • Charitable Donations? Especially this year with new rules for first time contributors
    • Medical Expense can be important if you have enough expenses
    • RRSP receipts are very important, especially if you just made a large deposit.
    • Daycare receipts are important for dual income families
    • Rental costs if you are lower income
    • Disability Tax Credit claims
  2. If you got married in 2016, don’t forget to tell the CRA about this. This might help your taxes, but the CRA needs to know. I tweet’ed about this, and surprisingly, a fellow financial blogger admitted to forgetting to do this.
  3. You can auto-fill your return this year, just buy Tax Software, go to the CRA Auto-Fill web page, and follow the instructions. This means no one has an excuse to not file their taxes this year.
  4. Go over your 2015 (or previous year) tax return. I do this every year, because I always forget to claim things, and the previous year return reminds me. The statement of assessment is important to see whether your claim was correct.

These are only a few simple tips, but it is time to start thinking about your taxes.

Tax season

T4 From the CRA Web Site

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Tax Tips for Prize Winners

For those of you who read here regularly, I don’t normally have Guest Posts, but Intuit answered a question of mine about lottery winnings and payment (see in article) and, I am giving away 5 TurboTax On-Line Licenses! The contest will run until 6:00 PM on April 19th.

To enter, answer the following question (in the comments section of this article, and include a valid E-mail Address):

If I bought my Lotto Max ticket with Petropoints, are my winnings now taxable?


Tax Tips for Prize Winners

By Jennifer Gorman, TurboTax

Earlier this year, it was announced a Mississauga woman had won Canada’s largest lottery jackpot ever – $64 Million. We’ve all dreamed about winning the lottery, retiring early, living a life of luxury and taking vacations at any time. With that said, let’s take a look at what winning the lottery means in terms of taxation for any lucky winners.

Casinos and Lotteries

Canadians are in luck when it comes to lottery and most casino winnings as they are considered windfalls and are tax-free! Even winnings from most sports pools, sweepstakes, or lotteries sponsored by a charitable organization are generally tax-free.

However, while the Canada Revenue Agency (CRA) doesn’t require you to pay tax on the winnings themselves, you are subject to tax on any money your windfall generates. Interest earned from bank accounts, GICs, and savings bonds is considered taxable income and must be reported on your tax return.

Does method of payment for the winning ticket make it taxable? No, method of payment for your ticket, even if it’s given to you as a gift, doesn’t change that the winnings are considered non-taxable windfalls.

Thinking of going pro as a card shark? The CRA has recently begun examining how “winnings” by professional gamblers are treated. Because of the expectation of profit, the theory is that monies won by professional gamblers should be classified as business income and subject to tax like any other type of business income. This means professional gamblers could also deduct related “business” expenses such as travel expenses, tournament fees, and equipment used in gambling. This theory is interesting as it opens to door to claiming a business loss if you didn’t win enough to cover your gambling expenses.

Workplace contests

Prizes won through your workplace are generally counted as part of your income. Your employer will deduct income tax, Canada Pension Plan and in some cases, even Employment Insurance premiums on this type of award. Your T4 will have the amount of the taxable benefit listed in box 40.

The one potential exception to this if you win a prize in a draw by a social committee in your workplace. If the social committee, which is entirely funded by employee fundraising, paid for the prize, then any gifts or awards the social committee gives out are non-taxable. This isn’t the case if the committee is funded by the employer, as any gifts or awards the social committee gives out are taxable benefits.

Niagara Falls or Vegas?

While both can be lots of fun, if you hit the jackpot from an American source, your winnings will be taxed. The US Internal Revenue Service (IRS) considers all winnings, even from lotteries, to be taxable. If you hit the jackpot at a US casino, expect a good chunk of those winnings to be withheld by the casino to ensure your tax obligations are met before you even leave the country. Even if you win big from your own home on a US online poker site, for example, your big score will be considered to be American income and taxed accordingly. You may also be required to submit a US tax return the following April to ensure the proper amount of tax was remitted to the IRS.

About Jennifer Gorman:

Jennifer is a tax expert with more than 20 years experience helping Canadians. She enjoys holding seminars in her hometown in Newfoundland to teach seniors and students how to use TurboTax to prepare their own returns.


Site Note: Now just because this article talks about winning at the lottery, this does not mean I want you to go out and buy lottery tickets! That is not the message to take away from this, this is an informational piece about taxation.

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Tax Reflections for 2016

So I spent most of the weekend and yesterday working on my taxes (on and off), and I have come to a few simple revelations about taxes:

  1. I remember why when I had to choose a major at University I did not choose Accountancy. I love accountants (some of my best friends are number crunchers), but I am just not a details guy, and that is a lethally bad trait to have if you are a lover of Arithmetic on steroids (aka Accountancy).
  2. I am really glad that I blog, and I keep PDFs of my previous years tax returns, because they remind me of all of the things I have to remember to include in my return. This is all without all the new tax rules, I barely remember the old ones.
  3. I thank the person who wrote the first tax preparation software, because I remember doing this by hand, and I hated it even more back then. Yes, there are psychotic number lovers who do their taxes by hand (for fun), but I am not that guy.
Tax Time

Tax Time

I was kind of bummed that no one sent me any Tax Prep Software giveaway swag, but I guess I am not mainstream.

Here is a list (yes I hate lists, but in this case I will be a hypocrite) of the things I always forget, until I look at previous year tax returns:

  1. What the heck am I claiming as a business expense? Yeh, I claim this thing as a business (hard to believe). Expenses? How much it costs to have this thing hosted (this isn’t running on some free site).
  2. I need to remember to get my remaining child who transfers tuition to me, to sign a form, in case my friends at the CRA want to see my receipts.
  3. The UCCB is changing again, but for now, you still have to claim the income from last year.
  4. I had to go back through my Quicken logs for 2015 to find my:
    • Charitable donations that I forgot. My Church gives me a great receipt, but smaller donations tend to slip through the cracks
    • All my medical expenses. Remember I am claiming my son’s school fees as a medical expense as well, so finding all of the Occupational Therapy sessions he had (that are not paid for by my insurance), helps out as well.

To those waiting until the last-minute to do their taxes, I wish you bonne chance, you will be waiting a while for any refund. I have submitted my children’s returns (they are straight forward), and I have completed my “first draft”, but will wait 2 days to reflect further on things I may have missed, or forgotten.

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Time to Re-apply for the Disability Tax Credit Certificate

Let me preface this post with a thank you to Milburn Drysdale at ASDFunding.com. His documentation is what we based most of this work on, and if anyone asks you, they should check out his site before you read anything over here about Registered Disability Savings Plans for Disability Tax Credits. I’d also like to thank my wife who has fact checked my statements.  Is it time to re-apply for the disability tax credit ? 

As I have mentioned my son’s disability was “verified” by the CRA in 2009. At the time it was a “conditional” verification, and the CRA said that he would need to re-apply for the disability tax credit in 10 years (i.e. back dated to 2005).

A few months ago, we received a child disability benefit notice from the CRA saying, the DTCC (Disability Tax Credit Certificate) would “expire” in December 2015 . I hadn’t thought about the fact that my son’s disability was viewed as a disability from birth, so the CRA credited me back taxes from when he was born. This meant that his disability tax credit period started from birth. Given my son has turned ten this year, it is logical that the CRA is now asking for a reassessment.

The first steps towards re-applying for the DTCC for my son was to go see our Pediatrician and have him fill out the T2201 Disability Tax Credit Certificate. Our Pediatrician could have turned us down and said, “No I won’t fill in the forms for you because in my opinion your son is no longer disabled”, however, that was not the case.

We then added to this documentation, a report from my son’s Occupational Therapist and a Speech Pathologist (Effect of Impairment Document), to help reaffirm my son’s disability diagnosis for the reapplication. It is better to have plenty of supporting documents for the application.

Is the reapplication a “slam dunk”? No, not by any means, we need to make sure that we have all supporting documentation done, and it still relies on the CRA to decide whether that documentation is sufficient or not. What if the CRA denies the reapplication for my son? A few things happen:

Final Notes

The advice we got from our Pediatrician (who I think I view as a subject matter expert, as he has done many of these) is you can never have too much documentation, and you must make sure the information is easy to follow for the CRA folks that will be making the decision. The goal is to have a well written clear application.

Some other notes from my wife, that I am not sure I completely comprehend, but here they are:

  • There is a list of qualified practitioners on the forms (T2201). This information is on the forms, supporting documentation can be from other professionals, but you need a specific professional to sign the forms.
  • Make sure you get your pediatrician or Doctor to fill in the right sections of the forms. There is nothing worse than doing all this work and have the CRA return the forms with a note saying, “You forgot to fill in the following sections:….”

The signed forms were sent via registered mail and we must now wait to see whether the Disability Tax Credit will continue for us.

re-apply for the disability tax credit

An Excellent Graphic from our friends at Moneysense about the RDSP benefits

 

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The CRA Does Not Like Change

Here is a Tuesday Quickie for you, I have pointed this one out a few times, but my Theory has been proven:

Whenever you have a major change in your life that causes a change in  your tax status, the CRA will ask for you to send receipts to verify it (i.e. a Review not an audit).

A simple theory, but it has been proven countless times for me:

  • Each time one of my kids started at University, either I or my child was asked to supply T2202A forms from the school.
  • When they moved from residence to a rental off campus, receipts for the rental
  • When I claimed my son’s school fees as a medical expense.
  • My middle daughter has just started a Chiropractic College, and the tuition fees are MUCH higher, thus the CRA wants receipts.


It’s not a big thing, and fairly easy to remedy, just keep this in mind, and keep those receipts.

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