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Like it or not, tax time almost here

By: David Christianson

Posted: 02/1/2013 1:00 AM | Comments: 0

It's time, folks. Yup. Hate to remind you, but tax time is almost upon us. Your slips have started to arrive, and getting your head into reducing your taxes may save you some money come filing time.

As you know, the deadline for filing is midnight on April 30. If you have self-employment income, you can delay filing until June 15, but you still have to pay any taxes owing by April 30, so even the self-employed need to know their bottom line by the end of April.

If you know (or suspect) you have a refund coming, then file as soon as you can. Refunds and assessments are now delivered back to you from CRA with lightning speed if you file early.

If you wait until the last minute, you will wait several weeks.

Some tax professionals also think late-filed returns are more subject to added scrutiny and even audits. I'm not sure that's true, but I have certainly seen many more mistakes made by last-minute filers that resulted in reassessments and penalties.

At any rate, let's make sure you have prepared to claim all credits and deductions you have coming. Some of these items are fairly new, so check the list carefully.

Everyone who is employed is entitled to the Canada Employment Credit, which basically cancels the federal tax on the first $1,095 of employment income. If you own a corporation and have decided to only take dividends and no salary, consider paying yourself and eligible family members at least $1,095 each.

Tradespeople can claim part of the cost of tools purchased in 2012.

Deduct costs for investment expenses, such as portfolio-management fees on non-registered investments, interest on loans taken out to invest, accounting fees that apply to investment income and safety-deposit-box fees if needed to hold investment certificates.

If you have made RRSP contributions in 2012, or the first 60 days of 2013, or if you have undeducted contributions carried forward, you will almost certainly want to deduct those. The exception would be if you expect your income to be significantly higher in 2013, pushing you into a higher bracket. In that case, carrying the deduction forward and using it in 2013 may be worthwhile. You will have to do the math on that to be sure.

The Family Caregiver Tax Credit is a 15 per cent federal credit (with corresponding provincial credit) on up to $2,000 of income for people who provide care to dependent relatives, including spouses, common-law partners, children under 18 or their parents.

Taxpayers with children have a number of credits they can claim in addition to the cash from the Universal Child Care Benefit, which pays $100 per month for each child in full-time daycare.

The Children's Fitness Tax Credit applies on the first $500 per child that is spent on eligible physical activities, and the Children's Art Tax Credit provides the same for artistic, cultural and other eligible programs. Both credits can be claimed for a given child.

The Public Transit Tax Credit applies to monthly (or longer-term) passes for the year with no upper limit.

Students can claim a tuition credit, education amount and textbook amount. The student must claim these amounts until the student's tax is reduced to zero, then they can transfer unused amounts to a supporting parent, grandparent, spouse or common-law partner.

Employers can claim up to 10 per cent of the wages they pay to eligible apprentices to a maximum credit of $2,000 per year for each apprentice. As well, there is a hiring credit for small businesses that meet certain criteria and have paid more in Employment Insurance premiums in 2012 than 2011.

Less commonly used are things such as the Home Buyers' amount, which helps cover the legal and related costs of a "first time" home purchase, and the Home Buyers' Plan, which gives you the ability to withdraw up to $25,000 tax-free from an RRSP to help fund the purchase of house. One-fifteenth of this amount must be paid back each year or the unpaid amount must be claimed as taxable income in that year.

Even if you have your return prepared by a professional, you can reduce your overall tax bill by making your tax preparer aware of all aspects your situation and any of these creditable amounts you have paid. They won't know everything about you unless you fill them in, so take seriously your share of the responsibility to make sure you pay the lowest amount of tax you legitimately owe.

Aah, tax season... at least it means warmer weather is coming.

Dollars and Sense is meant as an introduction to this topic and should not in any way be construed as a replacement for personalized professional advice.

David Christianson, BA, CFP, R.F.P., TEP, is a financial planner in Winnipeg, and author of Managing the Bull.

Republished from the Winnipeg Free Press print edition February 1, 2013 B6

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