Tax Return Filing Tips
Tax Return Filing Tips
Every year over 25 million Canadians file a personal income tax return. In the not-so-distant past, the majority of tax returns were filed manually, which required tax payers to complete the paper forms, assemble the package, attach receipts and mail the return to the Canada Revenue Agency (CRA). Today taxpayers have several electronic filing options and their popularity is growing annually. A tax payer can file using a telephone (only about one percent), directly on the CRA website (about 21 per cent), or by using a computer software tax program and filing electronically (almost 44 percent).
It is the tax payer’s responsibility to properly identify qualifying tax deductions, tax credits and relevant elections. The following is a list of some of the more common items that a taxpayer should review to determine their applicability. If eligible, checking the appropriate box on the electronic form (if filing electronically) and incorporating relevant information is essential in order to access the targeted beneifts.
- Charitable Donations. While donation receipts do not have to be included when income tax returns are filed electronically, the taxpayer should ensure that all the receipts have been located and claimed. Retaining the receipts in a safe accessible location is important as the CRA has the right to request them to substantiate amounts claimed. The CRA’s administrative policy allows a couple to group any charitable donations and claim the combined amount on one tax return.
- First-time Donor’s Super Credit. An individual and the individual’s spouse are considered eligible for the first-time donor’s super credit when neither has claimed the charitable donation tax credit in any of the past five years. To claim the credit in 2013, the five-year window means no donation credit claimed can have been claimed since 2007. The super credit adds an additional 25 percent tax credit on the first $1,000 of qualifying donations. Taxpayers need to identify themselves as a first-time donor. This credit is available for a limited period of time.
- Political Donations. Donations to political parties can generate significant tax credits. The maximum federal credit is $650 for donations to a federal political party or candidate of $1,275 or more. The provinces offer similar credits for provincial political donations.
- Investment Expense. Interest expense related to investment loans, fees for investment counsel and other investment expenses (such as certain brokerage fees) may be eligible for deduction. The deduction for safety deposit box fees will no longer be available after 2013.
- Capital Gains Deduction. While the taxpayer may be entitled to the capital gains exemption, he or she needs to recognize eligibility and enter the deduction on his or her income tax return.
- RRSP deduction. An individual can make contributions to his or her RRSP (up to the available RRSP room) but the deduction of any contributions is at the option of the taxpayer. RRSP contributions made in the first 60 days of 2014 may be deducted on either the taxpayer’s 2013 or 2014 income tax return, at the taxpayer’s option.
- Family Caregiver Amount. The caregiver amount is available to taxpayers who maintain a dwelling where they support a related individual who was dependent because of a mental or physical infirmity. The CRA does not know whether an individual qualifies for the family caregiver amount, so the taxpayer must complete the appropriate paperwork to demonstrate eligibility for the claim.
- Adoption Expenses. Certain expenses related to an adoption can be used to claim a tax credit by either parent.
- Tuition, Education and Textbook Amounts. While the university or college issues the appropriate tax slips to the student, it is up to the student to make the claim. An amount not claimed by the student may be eligible for transfer to a parent or spouse; however, to do so, the person to whom the amount is transferred must include the appropriate election form when completing his or her income tax return.
- Pension Splitting Election. Seniors may elect to split qualifying pension income if they file the appropriate forms with their tax returns.
- First-Time Home Buyer’s Tax Credit. A tax credit is available to first-time home buyers to assist in purchasing a first home.
- Persons with Disabilities. Persons with a disability may be eligible for a tax credit but must first file appropriate forms and be approved in order to claim the credit. Retroactive claims for limited periods are possible.
The CRA receives copies of the tax slips issued to a taxpayer and undertakes a matching process to ensure individuals report appropriate income. However, claiming credits and tax deductions is at the taxpayer’s discretion, and it is up to the taxpayer to make the appropriate claims.