Income Tax Is Like A Four Letter Word

Income Tax Return

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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March 2012 Canadian Budget Binder Budget Update

Hi there folks,

I’m back with the March 2012 budget update for Canadian Budget Binder.

You probably already know but we’ve just finished designing the Canadian Budget Binder Budget Spreadsheet and have tested it out this past month. We are continually trying to improve the sheet and so far we are very happy with the outcome. In the upcoming month we will look for a few volunteers to test it out and give us some feedback.

Most of the excitement has come from the “projected expenses” the expenses we have decided to budget in each month and transfer to a separate account until they come due.

Many of my fans agreed that when it comes time to pay one of these projected expenses they had to pull money from their savings or emergency savings to pay the bill as there was not enough money left in the budget.  Some even went as far as to put it on a credit card or use the line of credit as the money just wasn’t in the budget.

It’s the small things we tend to overlook and I really don’t want to be dipping in our savings to pay for them. The Emergency Savings is meant for just that, emergencies. We are thrilled to know we don’t have to scramble to pay the projected expenses any long nor take from our savings.

You will see some number changes in our budget like I mentioned last month I received a raise so I wanted to make adjustments when I had an exact Net Income.

You will also see we went over budget on grocery this month because…..

  •  We stock up on summer items as they are on sale as we volunteer with students in the summer so we like to be prepared to keep the food costs low.

Overall we were happy how the month turned out minus the grocery overage which we continually work on with our Monthly Grocery Game Challenge.

You will see our net income was higher this month due

  • extra pay in March
  • interest from the accounts
  • cheques received,
  • mail in rebates
  • gift cards received

So without any more of my chatter…. let’s get on with it shall we!

Overview – I will post this each month for reference.

We now have 3 accounts

We realized we shouldn’t be saving money for items we know we will have to pay for (projected expenses) in our emergency fund so we separated it. This way we have  a true figure for savings.

  1. Chequing- This is where all the money comes and goes
  2. Emergency Savings- This is where we keep our spare money for the time being
  3. Savings- This is where we put all the money for items we know we will have to pay for at some point in the year ie: Christmas, Income Tax, Vehicle Sticker. That way the money is ready to pay for the bill.

THE BREAKDOWN

Monthly Budget Total: $5742.00

Total Coupons Used: $471.08

Savings Overall: 6% *Note that everything we buy is always on sale or reduced in price and we try to use coupons as well with the product so the savings overall is based on the sale or reduced price. If we were to use the original price this percentage would obviously be much higher.

Needs To Go To Savings For Budgeted Expenses: These are expenses we know we will pay for throughout year and save monthly for = $576.59

Total Expenses Actually Paid Out is: $4577.75

Calculated is $7757.43 (total monthly income) – $3179.68 (total monthly savings) = $4577.75

Actual Cash Savings Going Into Emergency Savings Funds: $2603.09

Calculated is $7757.43 (total monthly income) – $4577.75 (actual expenses paid out for the month) – $576.59 (budgeted expenses) = $2603.09

Total Net Income: $7757.43

Explanation of Numbers in Budget Below:

  • First number is :Total Budgeted Cost
  • Second Number is: Actual Spent
  • Saved in Account for Future-means it will be put in a Savings account to accumulate to pay bill  or future expense when/if due.
  • If no remark then the money just stays in chequing account to cover  future overage so we don’t need to pull from emergency savings. 
  •  Our Monthly Budget is :$5742.00
 Mr.CBB’s Budget: March Monthly Total Expenses $7757.43
Total Net Income March:$7757.43
  • Allowance $15-Spent $31.55 (beer, but I save up my allowance)
  • Car Repair/Maintenance $11-  Spent $74.02
  • Christmas $25  Spent $25- Saved in account for future
  • Clothing $10 Spent $7.22 $2.77- Saved in account for future
  • Dentist/Prescriptions $5-  Spent $7.58
  • Electricity/Water $153.05-  Spent $ 282.98
  • Entertainment-$7-Spent $0- Saved in account for future
  • E-test-$4- Saved $4- Spent $39.55
  • Furnace/Hot Water Rental-$37.46- Saved $37.46 in account for future
  • Union Gas (domestic) -$59.19-Spent $77.34 This is averaged out based on past 2 years bills.
  • Gasoline/Diesel (vehicle)-$192-Spent $129.13
  • Grocery- $190- Spent $388.35 (lots of stocking up and SDM 20x points)
  • Home Maintenance-$50-Spent $24.20-Saved $25.80 in account for future.
  • Car/Home Insurance-$189.46-Spent $189.46 (this will go down now that my truck is back on the road)
  • Income Tax Filing-$2.50-Spent $30.00 for 2011 tax filing
  • Investment-$767.00-Spent $767.00
  • Licence Renewal Fees-$11.84-Saved $11.84 in account for future.
  • Life Insurance-$135.05-Spent $135.05
  • Lottery-$12 -Spent-$12
  • Membership/Club/Sports-$6-Saved $6 in account for future.
  • Miscellaneous-$294.50-Spent $255.93
  • Mortgage-$1470.30 -Spent $1875.18 (extra week in March)
  • We Save $101.26 in account for future extra mortgage payments throughout the year depending on the month and how many weeks are in the month. The monthly mortgage payment also includes an extra payment of $417 a month towards the principal.
  • Parking-$5 -Spent $0
  • Pet-$2.08-Saved $2.08 in account for future.
  • Property Tax-$287.45-Saved $287.45 in account for future.
  • Emergency Savings-$1568.73-Saved $3179.68-$576.59 budgeted costs we put away each month= $2603.09
  • Vehicle Sticker-$16- Spent $74.00
  • Cable/Internet/Cell/Home Phone-$165.56-Spent $165.56 Rogers have increased their prices as of March 1 so this cost went up for us.
  • Work Tools-$50 Spent $4.64  Saved $44.36 in account for future.

January 2012 Canadian Budget Binder Budget

February 2012 Canadian Budget Binder Budget

January 2012 Canadian Budget Binder Net Worth Update

February 2012 Canadian Budget Binder Net Worth Update 

You can follow me on Facebook  HERE or Twitter HERE. Come join the conversation! Mr.CBB

Photo Courtesy of: Copyright (c) <a href=’http://www.123rf.com’>123RF Stock Photos</a>

February 2012 Canadian Budget Binder Budget Update

$
How much did you spend this month?

Well here we are again folks at the end of another challenging month for us. We have worked hard at making changes to our budget as we had found some flaws in our 2011 budget.

We also went ahead and simplified the budget so we are putting away money each month for purchases we KNOW will happen this year. That way the money is saved bit by bit monthly and no surprises when it comes time to pay it. We also don’t want to use our emergency savings for bills that are not an emergency.

So here are our last figures for February 2012.  I thought we would be over budget after the 20x points event at SDM but we are on track. These darn events are amazing but can put a dent in our grocery budget. The good thing though is we only buy items we WILL need and WILL use so our future grocery bill will be less. You can’t deny that  Shoppers Optimum Points is the best loyalty program out there.

One reader asked about our grocery budget and what it includes. My answer was all household cleaning products, pet food, health and beauty not including prescriptions. Thanks for the questions fans keep them coming in. :)

I also had a bonus for 2k this month so our monthly income has been inflated. My salary has gone up as I was given a raise as of end of February but I am waiting for actual figures.

If you have any questions or comments feel free to ask. This is a new budget for us. We are working through it in March to fix any glitches we find and to get used to it.  So if it seems a bit wonky to you, have no fear the spreadsheet on our end is much more detailed. This is just a snapshot.

We now have 3 accounts now so our January Net Worth and Budget figures have all changed. We realized we shouldn’t be saving money for items we know we will have to pay for in our emergency fund so we separated it. This way we have  a true figure for savings.

  1. Chequing- This is where all the money comes and goes
  2. Emergency Savings- This is where we keep our spare money for the time being
  3. Savings- This is where we put all the money for items we know we will have to pay for at some point in the year ie: Christmas, Income Tax, Vehicle Sticker. That way the money is ready to pay for the bill.

Cheers!

Mr. CBB :)

THE BREAKDOWN

Monthly Budget Total $5000.00

Total Coupons Used: $164.61

Needs To Go To Savings For Budgeted Expenses: $528.83- These are expenses we know we will pay for throughout year and save monthly for.

Total Expenses Actually Paid Out= $3498.68  Calculated is $4027.51-$528.83= $3498.68

Total Needed to Cover  Expenses Actually Paid Out and Budgeted Expenses: $4027.51- Calculated is $3498.68+$528.83=$4027.51

Actual Cash Savings Going Into Emergency Savings Funds:$3275.62 This is what is left after paying all the above $7303.13- $4027.51=$3275.62

Total Net Income: $7303.13

Explanation of Numbers in Budget Below:

  • First number is :Total Budgeted Cost
  • Second Number is: Actual Spent
  • Remarks- Saved in Account for Future-means it will be put in a Savings account to accumulate to pay bill  or future expense when/if due.
  • If no remark then the money just stays in chequing account to cover  future overage so we don’t need to pull from emergency savings. 

Budget:

  • Allowance $15-Spent $0
  • Car Repair/Maintenance $11-  Saved $11-Saved in account for future.
  • Christmas $25  Spent $25- Saved in account for future
  • Clothing $10 Spent $21.92-overspent this month
  • Dentist/Prescriptions $5-  Spent $51.15- overspent this month
  • Electricity/Water $153.05-  Saved $153.05- Saved in account for future
  • Entertainment-$7-Spent $0
  • E-test-$4- Saved $4-Saved in account for future
  • Furnace/Hot Water Rental-$37.46-Spent $112.38
  • Union Gas (domestic) -$59.19-Spent $76.64 This is averaged out based on past 2 years bills.
  • Gasoline/Diesel (vehicle)-$192-Spent $178.93
  • Grocery- $190- Spent $181.49
  • Home Maintenance-$50-Spent $19.75-Saved $30.25 -Saved in account for future.
  • Car/Home Insurance-$189.46-Spent $189.46
  • Income Tax Filing-$6-Saved $6 for when we pay for our 2011 filing- Saved in account for future.
  • Investment-$767-Spent $767
  • Licence Renewal Fees-$11.84-Saved $11.84 in account for future.
  • Life Insurance-$135.05-Spent $135.05
  • Lottery-$12 -Spent-$12
  • Membership/Club/Sports-$6-Saved $6 in account for future.
  • Miscellaneous-$294.50-Spent $199.61
  • Mortgage-$1470.30 -Spent $1389.12-Saved $81.01 in account for future- extra payments 2 months of the year-5 week mortgage payments. This also includes an extra payment of $417 a month towards the principal.
  • Parking-$5 -Spent $4.50
  • Pet-$2.08-Saved $2.08 in account for future.
  • Property Tax-$287.45-Saved $287.45 in account for future.
  • Emergency Savings-$829.11-Saved $3804.45-$528.83 budgeted costs we put away each month= $3275.62
  • Vehicle Sticker-$16-Saved $16 in account for future.
  • Cable/Internet/Cell/Home Phone-$159.68 -Spent $159.68
  • Work Tools-$50 Saved $50 in account for future.
Keep an eye out as I will be posting out Monthly Net Worth Update as well for February shortly.
How well did you make out with your budget this month?
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Picture compliments of:Copyright (c) <a href=’http://www.123rf.com’>123RF Stock Photos</a>