Image Courtesty of Grant Cochrane /Freedigitalphotos.net
Income Tax for some people is like a four letter word, they just don’t want to hear it, and dread the April 30th, 2013 deadline we have here in Canada to file a personal income tax return.
But it does not need to be like that.
I have prepared and been filing personal and small business tax returns for over 15 years. What started for me as a seasonal job, with H&R Block to supplement my regular income, has turned into a small business. I find it incredibly rewarding when I help people take advantage of all tax credits that are available to their families. From arts and sports credits for kids, to home improvement credits for seniors, there are many credits people don’t think of when filing their taxes.
Tax Credits
Tip: Did you know that if your Grandmother needs a shower bar in her bathroom, that she can get a tax credit for having it installed? If you need to have your home wheel chair accessible, there is a credit for that too.
Most people know of the “popular” tax credits, medical, rent, property taxes, and childcare. What they may not realize is that the childcare credit also covers things like paying for a day camp for a PA day, or summer camp in the summer or simply paying the neighbourhood childcare provider who watches your kids for March Break. The child care credit does not go away because your children are in school.
Charitable donations are a wonderful way to bring down your payable tax bill; registered Ontario Charities give receipts for cash donations, and a fair market value receipt for donations of goods.
For instance, that bag of clothes and old Tupperware you drop off at Goodwill, make sure you grab a receipt. Are you pledging $10.00 for your nephew to participate in jump rope for heart, keep the receipt?
How To File Income Tax
Most average Canadian families do not need a CPA (Chartered Public Accountant) to prepare their taxes, nor would they want to pay those types of fees. There are many options for filing your taxes, you can do it yourself using one of the many Income Tax preparing software programs available whether web-based or store-bought. Examples are Turbo Tax Canada, Studio Tax, Genutax, Ufile, Netfile, H & R Block Canada etc. Alternatively you could go to one of the “big box” preparing offices, or find someone like me, with years of experience that will prepare and file your income tax return for a fraction of the cost.
Please don’t ever use “Cash Back” tax services if you don’t need to. In this day and age, if you have an income tax refund coming, you will receive it in about 10 days, after E-File with Direct Deposit. Cash Back services keep a large portion of your return. The amounts that are charged are regulated by the government and are 15% of the first $100.00 and 5% of every $100.00 after that. That can calculate to $90.00 plus HST on every $1000.00 of your return. (On a basic return)
Some Income Tax Deductions Tips to maximize your tax refund and lower your payable:
- Claim medical expenses- People miss claiming common expenses like Blue Cross, and fees paid to medical practitioners like speech-language pathologists, occupational therapists and acupuncturists.
- Maximize babysitting deductions- The maximum dollar amounts claimable have not changed this year, still $4,000, $7,000 or $10,000, which depend on the child’s age and health. Usually it’s the lower earner who should claim these expenses.
- Minimize tax on severance- If you’ve lost your job, your severance package can help but it can also put you into a high tax bracket because it’s usually paid in a lump sum. One way to reduce your taxes is to maximize your RRSP contribution room.
- Claim the new tax credits for children’s activities- Many parents are still not aware of this Children’s Art tax credit. Parents can claim up to $500 of eligible expenses per child under the age of 16 at the beginning of the year in which the expenses are paid or under 18 at the beginning of the year in which the expenses are paid and if they qualify for disability tax credits. Any eligible expenses in 2011 and subsequent years would qualify for this credit. There are new amounts to be claimed on the tax return for enrolling your children in the arts or sports activities. Because the Children’s Arts Amount is new, you’ll need to remind yourself to dig out the receipts.
What you can’t claim (but I am frequently asked if you can)
- Interest on your mortgage (unless you have income property)
- Medical expenses for pets
- Home Improvements (with some exceptions, the “new” healthy home credit, is one)
- Funeral costs, wedding costs and legal fees paid for separation or divorce agreements
- Public Transportation costs if paid daily or per use (Monthly Pass purchases can be claimed as a credit in Ontario)
Average Cost To File Your Income Tax Return
However you choose to file your Canadian Tax Return, be sure to keep all receipts and supporting documentation of everything you claim. You can expect to pay anywhere from $30.00-$200.00 to prepare and file a basic return in Canada. You may pay around $200.00 on the high end for a CPA, $80.00 for a “big box” tax preparing office, and $30.00 for an experienced private tax consultant.
I also can’t stress enough the importance of using your maximum allowed RRSP contributions each year. In Canada we have until March 1 st 2013 to make contributions that will benefit our 2012 Income Tax Return. Budget accordingly and try to contribute as much as you can each year. Your maximum allowed limit can be found on your 2012 Income Tax Assessment.
For more information on your tax return: Canada Revenue Agency.
About The Author: Kim Rosa, a mom and grandmother,semi retired from a long career in the restaurant industry. A red seal chef, Kim spends her time these days, as a part-time chef/consultant at a fine dining Bistro in South Western Ontario, as a small business operator, doing books for a few local restaurants, and preparing taxes during tax season. An avid couponer,and advocate of frugal living. Kim shares her love of couponing and deals on her Facebook page: Coupon Ontario
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