By Sheryl Smolkin

Today I am interviewing Tim Cestnick, Managing Director of Advanced Wealth Planning at Scotia Wealth Management for savewithspp.com. Tim also writes a personal finance column called, “Tax Matters” that has appeared every Thursday for almost twenty years in Canada’s national newspaper, The Globe & Mail. We’re going to talk about some of the things you need to know to complete and file your income tax return.

Welcome Tim and thanks for joining me today.

Q: What are some of the tax credits or deductions that many people aren’t aware of or that they may miss?
A: There are so many kinds of tax credits now. It’s important to really check to make sure you’re not missing something that you haven’t claimed in the past that is now available. Some of the things we see people missing are for example, interest deductions. Interest is deductible where you borrow the money for the purpose of earning income from a business or from an investment.

Also, I think fitness tax credits and tax credits for children are another area that people sometimes overlook. Don’t forget if you’ve paid for any kind of sports activities for your kids or even artistic classes like music or piano lessons, you can claim a tax credit for these amounts.

The amounts have actually been increased for fitness tax credits. You can claim up to a thousand dollars of eligible activities. It would get you pretty decent tax relief, probably two hundred and fifty dollars in tax relief federally plus maybe in total about four hundred dollars in tax relief from local and federal governments together, so it’s worth claiming those credits.

People also sometimes forget about the education and textbooks tax credits. But based on the March 2016 budget this will be the last year for many of these tax credits. 

Q: Are receipts required in all cases?
A: Yes, you do need receipts. You don’t have to turn them in with your tax return when you file electronically, but you have to keep them on file.

Q: Why should tax returns be filed for children, even if they don’t have any taxable income?
A: There are a couple of reasons why it might make sense to file a return for a child, even a minor child. Some people don’t even realize you can do this. If your child has earned any type of income at all from babysitting, or cutting grass, or delivering papers, report that income on a tax return because they’re not going to pay tax anyway if their total income is under $11,400 for 2015. However, they will create RRSP contribution room for later when they graduate and are working full-time.

Also, once your child reaches age 19 there’s good reason to file even if they have no income because they will be entitled a GST or HST credit which results in cash back to them of almost $300. 

Q: If taxpayers own stock in an unregistered portfolio, what are the advantages of making a charitable donation using stock instead of selling the shares and donating cash?
A: You’ll be better off donating securities that have appreciated in value than donating cash. You get a full donation tax credit for the value of the shares you are donating and on top of that, the government eliminates the capital gains tax on the securities. 

Q: What is the advantage to taxpayers of filing electronically instead of submitting paper forms?
A: There are a couple of reasons why you might want to do this. First of all, if you’re expecting a refund, you will get it faster by filing your return electronically. They can process it sooner and you will get your money much faster.

Also, it’s just simple to not have to send in all the paperwork. Some tax returns would be two inches thick if taxpayers had to send in all their receipts and what not. It’s just easier and quicker. 

Q: Do slips and receipts always have to be sent in with a paper filing?
A: Yes, you do have to send a number of slips and receipts. However, there are things you don’t necessarily have to provide. For example, if you’re an employee and you are claiming a certain employment expenses like use of your car, you don’t have to file a Form T2200 signed by your employer to say you had to pay for those costs. But you have to keep it handy. 

Q: Why is it getting a big tax return not necessarily a good thing?
A: A tax refund is not necessarily a good thing because what it really means is that you’ve been lending money to the government over the course of the year and they’re only now going to give it back to you. The perfect scenario is that you file a return and you owe nothing and you receive nothing back. The reality is most people actually owe or get a refund of some kind. You just want to make sure the refund is not too big. 

Q: If an individual is reporting self-employment income and wants to deduct expenses, what are a couple of things that they should do to ensure that the expenses are allowed if CRA comes knocking?
A: The first thing is to make sure amounts you’re claiming are allowed. That includes any kind of expenses you have incurred for the purpose of earning income from your business but expenses also have to be reasonable in amount. In most cases, as long as you’re paying a third party for some of these expenses that shouldn’t be an issue.

You also have to make sure that you do keep any receipts or invoices that you paid as part of your expenses just in case CRA asks for them. There was a court decision that was handed down a number of years ago which established that if you don’t have a receipt for something it may still be deductible if you can demonstrate you paid that amount and the cost is reasonable. But it’s just easier if you keep all of your receipts. 

Q: What are the penalties if Canadians file their tax returns late?
A: If you don’t owe taxes then there’s no penalty for filing late. Of course you won’t get your refund as soon as you should so it’s nice to file on time. If you owe money and don’t file your return on time, there is a five percent penalty on the tax owing the day after the due date. The key is to make sure you file your tax return on time even if you don’t have the money to pay your taxes immediately. By doing that you’ll avoid any penalties.

Q: If you do file on time and you owe money, when do you have to pay it?
A: The money is owing  as of the due date of your tax return. Typically, for most people that would be April 30^th. If it’s not paid by that time, you will end up paying some interest on the outstanding tax balance — not a penalty, just interest. 

Q: If CRA sends a notice requesting quarterly tax installments is it ever safe to ignore it?
A: You should never exactly ignore it. The reason they send you the statement is because they expect that you probably owe installments for the coming year. What you need to do is to evaluate whether or not the amount  they’re asking for is correct.

If you’re receiving a lot of investment income or you are a senior and don’t have employment income, you may end up  owing taxes when you file your return. Your best bet is to take a look at your income for the coming year, assess whether or not you think your taxes will be less or more than they were in the past year and actually do the math on your installments. When CRA sends you a statement you don’t have to abide by it, but don’t ignore it because you may actually owe  quarterly payments.

Q: So if you think your earnings will be lower, you do not necessarily have to remit the whole amount?
A: There have been situations where people have been asked to pay installments because they had a certain amount of income that was a one-time event. In that case, you may not have to make installments next year at all. You have to know really what your income is going to look like in this coming year compared to where it was last year to be able to make a decision about whether you can ignore a request for installments or pay a smaller amount.

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This is an edited transcript of a podcast interview with Tim Cestnick recorded in March 2016.

By Sheryl Smolkin

It seems like filing income tax returns gets more complicated every year. Most of us will be e-filing this year because the Canada Revenue Agency is no longer sending paper forms to every household. But even if you carefully fill in the blanks on an electronic form, it’s easy to miss important deductions or tax credits that will help you to hold on to more of your hard-earned money.

Here is a list of 10 tax deductions and tax credits to remember when you are filing your tax return.

1. Line 208 – Saskatchewan Pension Plan contributions
   You must have available RRSP room to make an SPP contribution. SPP contributions should be reported on Schedule 7 of your income tax form and claimed on line 208. Both your application and your contribution must be received by SPP before a tax receipt will be issued.SPP contributions will be taken into account in determining RRSP over-contributions. Spousal contributions are permitted and if the contributor has available RRSP room, he or she may contribute and receive a tax deduction for both their personal and their spouse’s account. Spousal attribution rules apply to SPP.
2. Line 214 – Childcare expenses
   The annual childcare expenses you can deduct depend on the age of your child. For example:
   • For a child born in 2006 and later: $7,000
   • For a child born in 2012 or earlier: $10,000
   • For a child born 1996-2005:            $4,000

   What qualifies as a childcare expense and who can make the claim are discussed in detail on the Information Sheet and Form T778.

3. Line 215 – Disability supports deduction
   If you have an impairment in physical or mental functions, you can claim a disability supports deduction if you paid expenses that no one has claimed as medical expenses, and you paid them so you could:
   • Be employed or carry on a business (either alone or as an active partner).
   • Do research or similar work for which you received a grant; or
   • Attend a designated educational institution or a secondary school where you were enrolled in an educational program.

   You cannot claim amounts that were reimbursed by a non-taxable payment such as insurance. Expenses must be claimed in the same year they are paid.

4. Line 301 – Age amount
   You can claim this amount if you were 65 years of age or older on December 31, 2012, and your net income is less than $78,684. If your net income was:
   • $33,884 or less, you can claim $6,720.
   • More than $33,884, but less than $78,684, complete the chart for line 301 on the Federal Worksheet to calculate your claim.

   Don’t forget to also claim the corresponding provincial tax credit.

5. Line 319 –  Interest paid on your student loan
   You may be eligible to claim an amount for the interest paid on your student loan in 2012 or the preceding five years for post-secondary education if you received it under:
   • The Canada Student Loans Act.
   • The Canada Student Financial Assistance Act; or
   • A similar provincial or territorial government law.
6. Line 324 – Tuition, education, and textbook amounts transferred from a child
   The maximum tuition, education, and textbook amount transferred from a child (or from each child), is $5,000 minus the amounts that he or she uses, even if there is still an unclaimed part. Tuition, education, and textbook amounts that the student carried forward from a previous year cannot be transferred. Only one person can claim this transfer from the student. However, it does not have to be the same parent or grandparent that claims the student as a dependant.
7. Line 330 – Medical expenses
   You can claim on line 330 the total eligible medical expenses you or your spouse or common-law partner paid for:
   • Yourself.
   • Your spouse or common-law partner; and
   • Your child or your spouse’s or common-law partner’s child born in 1995 or later.

   The amount you can claim is the lesser of:

   • 3% of your net income; or
   • $2,109.

   To maximize this claim, it should be deducted by the spouse with the lower income.

8. Line 331 – Allowable amount of medical expenses for other dependants
   Claim on line 331 the part of eligible medical expenses you or your spouse or common-law partner paid for the following persons who depended on you for support:
   • Your child or your spouse’s or common-law partner’s child who was born in 1994 or earlier, or grandchild; or
   • Your or your spouse’s or common-law partner’s parent, grandparent, brother, sister, aunt, uncle, niece, or nephew who was a resident of Canada at any time in the year.
9. Line 365 – Children’s fitness amount
   You can claim to a maximum of $500 per child, the fees paid in 2012 relating to the cost of registration or membership for your child or your spouse’s or common-law partner’s child in a prescribed program of physical activity.
10. Line 370 – Children’s arts amount
    You can claim to a maximum of $500 per child the fees paid in 2012 relating to the cost of registration or membership of your child or your spouse’s or common-law partner’s child in a prescribed program of artistic, cultural, recreational, or developmental activity.

Have you filed your taxes already? Send us an email to so*********@sa*********.com and tell us about other valuable tax deductions we may have missed. If your story is posted, your name will be entered in a quarterly draw for a gift card. And remember to put a dollar in the retirement savings jar every time you use one of our money-saving ideas.

If you would like to send us other money saving ideas, here are the themes for the next three weeks:

18-Apr	Wedding	How to beat the high cost of weddings
25-Apr	Taxes	Why you should file your tax return on time
2-May	Gardening	Cheapest ways to plant a maintenance-free garden