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Archived
Tax Columns
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Fredericton Daily Gleaner ~ Capital Appreciation ~ UCCB ~ January 22, 2007 - 25 Feb 2007 by TaxHelp
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Today is the first day that Ottawa will begin receiving 2006 tax returns filed by professionals under the batch process a sure sign that spring is around the corner and the annual task of preparing ones return is on the horizon. With that in mind, over the next few weeks we are going to look at some of the new wrinkles you may encounter this year.
One of the major promises of the federal election campaign won by the Conservatives focused on the distribution of dollars for parents to assist with the cost of child care. The Universal Child Care Benefit (UCCB) was formally developed and began to distributed cheques of $100 per month starting last July to parents of children under the age of six.
This is just the latest wrinkle in the efforts of government to subsidize the cost of children. Those of us with university aged kids might recall the complex system of funding that existed up until the early 1990s. Moms who did not necessarily work outside the house could file a tax return and receive a refund of hundreds of dollars per child under something called the Child Tax Credit. There were also non-refundable credits where the children were named and claimed on the tax return. And there was a monthly payment that was taxable called the Family Allowance and was reported on a TFA1 by the higher income.
All of that was replaced by what we now know as the Child Tax Benefit (CTB). This payment is actually a consolidated amount based on a number of factors and contains a federal and a provincial component. It is income tested. The amount reduces as the combined family income increases, so that upper middle class families may receive no CTB.
This is an important point, for the new benefit as the name implies is universal. It is designed to be paid for all children under six. If in fact you do not receive the CTB because of income, you need to apply for it anyway in order to be put on the list of UCCB recipients.
While it is typically the mom who ends up with the payment, fathers, grandparents or guardians are also entitled to claim the cheque if they provide primary care for the child. Payments continue until the child reaches the age of seven.
While this payment is taxable, interestingly enough it is reported by the lower income spouse as opposed to the old Family Allowance program. This has the advantage of being taxed at the lowest marginal rate in the family. Perhaps it may not attract any tax at all other than a reduction in any spousal claim that might be made. The UCCB is reported on the new form RC62, and this will be issued in early February.
While a new application is not needed each year to take part in this program, the CTB is paid only as a result of the filing of a tax return, so it is recommended that a recipient continue to submit a T1 each spring.
Some tax filers have experienced the government offset programs. Over the past decade, the Canada Revenue Agency has become very effective at collecting unpaid debts for many government programs. Anyone who is delinquent on a student loan account, or owes child support payments know that a tax refund can quickly be confiscated. However, the UCCB is not a source of payment. These cheques are specifically excluded from any collection measures.
As this is the first year for the reporting of this program, be aware that you need to declare this income, so keep an eye out for the RC62. While it is likely to be matched when you file your return, even if you forget to report it, there may be the odd occurrence that it is missed. However, in the fall the CRA runs a matching program. Unreported income is normally caught at that point, usually resulting in a bill that may include a penalty just in time for Christmas an unwelcome present at any time of the year.
By the way, we still have a few times left for any group looking to have someone come out and offer a session where we discuss the newest tax changes. These events usually run somewhere around an hour once a question-and-answer is completed and are offered both during the day and evening. Most important, there is no charge for this service.
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 Mondays.
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