|
|
Archived
Tax Columns
Click on the headline to view article.
|
Fredericton Daily Gleaner ~ Capital Appreciation ~ Universal Child Care Benefit ~ July 31, 2006 - 17 Sep 2006 by TaxHelp
|
If you have a child under the age of six, as they say, the cheque is in the mail. Last week millions of Canadian families began receiving the new Universal Child Care Benefit of $100 per month for each qualified youngster.
This continues a long history of government subsidization to those who choose to have kids. In fact, the Family Allowance program was Canada’s first universal welfare program, payable to all families with the first payment made on July 1, 1945. Those with long memories and older children will remember the monthly payments were reported by the higher income spouse. Income reported on the TFA1 (of approximately $35 per month per child) ended up being phased out at the end of 1992, along with the other two components of child subsidy delivered through the tax system.
In those days, a taxpayer was able to take a credit for their children on the tax return. There was even an incentive credit available for those taxpayers with more than two children. These had the effect of lowering the tax bill but were not refundable. On the other hand, there was something called the Child Tax Credit. Most often this amount was paid to the mother, and was generated by filing a tax return. Even if the qualified parent was not working, he or she received these funds (that were in the hundreds of dollars per child) each spring, in the form of a tax refund.
These three component parts were eliminated in favour of the Child Tax Benefit. This monthly payment was no longer taxable and served to simplify and enhance the distribution of funds based on an income test. Once family income crossed a certain threshold, benefit payments were reduced based on income. This process served to allow those who needed the most financial help to receive it.
This mechanism has continued to be enhanced to include other forms of child subsidy. The child benefit supplement, provincial child tax benefits and the child disability benefits are all distributed through this system, paying various amounts based on age and income.
The recent federal election campaign introduced the concept of direct payment of subsidy for child care expenses. The Universal Child Care Benefit pays $100 to parents of children under the age of six. The amount is taxable, but in the hands of the lower income spouse, which is a welcome change compared with the old baby bonus. Furthermore, the payment itself will not be considered in any of the other social programs that are income tested, like the Child Tax Benefit or the Goods and Services Tax Credit. As well, it will not reduce any Old Age Security, Guaranteed Income Supplement or Employment Insurance Benefits. Parents will be happy to hear that it won’t impact the child care expense deduction on the tax return. Ultimately, it replaces the under 7 child supplement currently in place, so some parents may see a reduction in their monthly CTB cheque.
Have a little one in your house and didn’t get a payment? Perhaps you are not on the list. If that’s the case you should contact the Canada Revenue Agency and complete form RC66. This is the standard application and while it doesn’t specifically reference the new program, it will start the process. For those with access to a computer, this form is available on the government website as a fillable pdf.
Roger Haineault is with Help 4 Taxes. He can be reached by email at roger@help4taxes.ca or by calling 1-888-450-1212. His column appears Monday. |
|
|
|
|
