Twelve timely tips for tackling your taxes:
(Toronto, 26 April, 2011) With the hours ticking down to this year’s tax deadline, EY suggests asking yourself the following key questions. Some will save you time, some will save your nerves and — best of all — some may even save you money.
- What are you carrying in your back pocket? From unused RRSP contributions to interest on student loans, you may have carry-forward balances to use as deductions or credits for 2010. Check your prior year return, notice of assessment or online Canada Revenue Agency account to find out.
- Do you care to share? If you received eligible pension income in 2010, up to 50% can be reported in your spouse’s or common-law partner’s tax return. You’ll generally reap the greatest benefits when one member of the couple earns significant pension income while the other has little or no income. But evaluate all options, as there are sometimes exceptions to that rule (often when the “clawback” of old age security is involved).
- How are you helping the community? If you made charitable donations last year, read up on the federal tax credit. This will help you decide if you should accumulate donations made over a few years to claim at once for the higher-rate credit. Don’t forget: if you’ve donated mutual funds, stocks or bonds, additional tax benefits may apply.
- What’s the best medicine? You should claim all the family’s medical expenses on the lower-income spouse’s return. Don’t forget, you may also be able to claim dependent relatives’ expenses. Just ensure the individual who is making the claim has sufficient tax to absorb the entire credit.
- Are you giving yourself enough credit? Be it child fitness, public transit, tuition or adoption expenses — a range of family-related tax credits exist. Do your research and make sure you’re taking advantage of everything available to you.
- Who’s the boss? Self-employed Canadians can claim a host of business-related expenses, including association fees, home-office expenses, salaries paid, car and parking costs and more. Review the list so you don’t miss out. Don’t forget: if you claim home-office expenses, you’re likely better off not to claim the depreciation on the home-office portion of your house. Although this will give you a deduction in the current year, you will lose some of the capital gains protection available from the principal-residence exemption.
- Could what’s old be new again? Don’t toss those old receipts in the shredder just yet. Some may still have value on your 2010 return — especially receipts for medical expenses and charitable donations. Even if you discover a claim that could only be made in a previous year, you can file a T1 Adjustment Request. You can go back as far as 10 years to claim previously overlooked refunds — including this year, if you’ve already filed for 2010 but overlooked something.
- Time to make a move? Anyone who moved to start a new job, business or
post-secondary education in 2010 might be able to claim certain expenses. Take a look back at the costs — from lodging and meals in transit, to the price of your moving company — and find out what applies.
- What makes a house a home? If you bought a house in 2010, you could qualify for a credit if neither you nor your spouse owned a residence from January 2, 2006, to the date of purchase of your new home. Anyone who bought a house to better meet the needs of a family member with a disability might also be eligible, regardless of home ownership history.
- Are you forgetting someone? If your children earn money from small or part-time jobs, filing a tax return establishes room for future RRSP contributions. Filing returns for teenagers can also mean a refundable tax or GST credit, and the ability to make immediate or later tax-free savings account contributions. University students should always file tax returns and report eligible tuition, education and textbook amounts to establish credits they can use in a future year.
- Why not go high tech? Using income-tax software to prepare your tax return has many benefits. Return preparation is generally quicker, easier and less open to mechanical errors. But even if you file electronically, always keep your receipts.
- Are you going to make the deadline? Missing the tax filing deadline can cost you in penalties and interest charges. Even those who expect a refund should still aim to meet the filing deadline, just in case a tax liability arises. Last but not least, for business owners and their spouses, the return deadline is June 15, but any taxes owning must be paid by the April 30 deadline.
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