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Fredericton Daily Gleaner ~ Capital Appreciation ~ Common Mistakes ~ April 23, 2007 - 06 May 2007 by TaxHelp
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Last minute potpourri.
Roger Haineault – “Capital Appreciation” – April 23, 2007.
Carl Sagan, the late scientist who popularized astronomy for the masses with his PBS series “Cosmos” (and also wrote the novel “Contact”, the basis for the Jodie Foster movie of the same name), became his own affectionate parody as a result of using the phrase ‘billions and billions’. Here we are with a week left in the traditional filing season, and while billions as a unit would be an extreme exaggeration, it is certainly true that there are still ‘millions and millions’ of us that will be preparing our income tax return for next Monday’s deadline.
So in no particular order, here are ten areas that we see as being prone to error or omission for those preparing their own return.
Medical expenses are worth approximately 25 cents for every dollar spent, provided you qualify. The catch is that you can only claim the expenses over three per cent of your net income. Many people feel that they cannot cross the threshold. However, health and dental premiums paid to a group plan through your employer factor into the mix. Also, there is something referred to as simplified travel where one may be able to claim 47.5 cents for every kilometre driven without receipts. Add in items that may not be covered through a medical plan like eyeglasses and you may qualify. The lowest taxable income should make the claim.
The T2201 Disability Tax Credit has traditionally been difficult to qualify for. However, the definitions have been revisited a number of times over the past handful of years. We advise more and more clients to apply with a resulting increase in claim. The credit is worth more than $6,000 for adults and $10,000 for kids.
In families where the parents are employed, there is a claim for child care. Most people are aware of this. However, camps also qualify for this deduction, so whether it’s a daycamp run by the YMCA or an overnight hockey school, don’t miss out on taking advantage.
There is a line for union dues and professional fees as a deduction. The practicality of this can be quite broad. Any membership or license that is required for you to maintain a qualification to earn taxable income can generally qualify at line 212 including liability insurance premiums.
Some individuals show up at the office and talk about working ‘under the table’. While we wouldn’t deal with illegal income, in fact in most cases one considers the venture from an enterprise model. If the client were self-employed could he or she expect to make a profit? If so, we report the income and claim any relevant expenses – which often generate a loss in the first few years that can be deducted against other income. However, if there is no hope for a profit, the income is not declared because it is generally considered a hobby.
Qualified charitable donations are extremely valuable as a tax credit. The first $200 is only worth about 25 cents on the dollar but anything in excess generates almost $48 in refund per hundred. As a result, couples should combine their receipts (including amounts that may be found on the T4) and make the claim on one tax return only.
Many individuals have nominal amounts of investment income. These items are normally claimed on a Schedule 4. There is a section for carrying charges which are tax deductions. Fees for safety boxes to store investments, counseling, and accounting type charges are all deductible. Also, any interest on money borrowed to make an investment is also an expense.
Some people move to start a new job. While actual qualified expenses may be claimed, there is support for a simplified method. Again, if the move qualifies, the taxpayer can claim vehicle expenses equal to 47.5 cents per kilometre plus $17 per meal during the period of the move against income earned at the new location.
Children and the common-law definition have been revisited over the past couple of years. If a single parent with their own means of support begins to co-habitate with a friend in a conjugal relationship who is not the biological parent of the child, then the relationship is not considered to be common-law until the term of residency is 12 months. This means that the amount for eligible dependant may be applicable whereas it wouldn’t have been in the past.
Finally, in a catch all fashion, don’t miss out on all the new items that can be found on this year’s tax return. Some of these include the new rules for tools, bus passes, the new employment amount for all who work, textbooks for students, pension income and age amounts, enhanced dividend credits and the universal child care benefit.
Good luck and call the office if you need a hand.
Roger Haineault is with Help 4 Taxes. He can be reached by email at roger@help4taxes.ca or by calling 443-HELP (4357). His column appears Mondays.
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