Tax Return Filing Tips for 2014

Filing a tax return isn’t always an easy task. Taxpayers want to ensure they claim every deduction and credit to which they are entitled. This means spending time under- standing the opportunities. Reporting income is simplified for many types of income because T-slips are issued to the taxpayer. The Canada Revenue Agency (CRA) is quick to note missing income because the Agency matches the T-slips reported on tax returns to the copies of the slip information filed with the CRA by the reporting employer or financial institution. The following notes are designed to highlight federal deductions and credits that might be of interest.

Updated for 2014 is the children’s fitness amount which has increased to $1,000 up from $500. The tax credit is available for parents who enrol their children, under the age of 18, in prescribed programs of physical activity.

New for 2014 is the search and rescue volunteer credit. Certain search and rescue volunteers are entitled to a tax credit based on a $3,000 amount. A search and rescue volunteer must perform at least 200 hours of eligible services in the year for an eligible search and rescue organization. A similar credit has been in effect for a few years for volunteer firefighters. Taxpayers can claim one or the other, but not both of these credits.

New for 2014 is a $1,000 exemption for emergency service volunteers. If a taxpayer has received a payment from a government, a municipality, or another public authority for work as a volunteer ambulance technician, a firefighter, or a search, rescue, or other type of emergency worker, the first $1,000 is exempt from tax. The T4 slips issued by this authority will show the taxable and exempt parts of the payment. It is important to note that if a taxpayer qualifies for this exemption and either of the search and rescue or firefighters’ credit, a choice must be made as only one of the three options may be claimed.

New for 2014 is the family tax cut which provides a tax credit of up to $2,000 for eligible couples with minor children based on the net reduction of federal tax that would be realized if up to $50,000 of an individual’s tax- able income was transferred to the individual’s eligible spouse or common-law partner. This is not simply a non-refundable tax credit – the calculation will require completion of new Schedule 1-A (Family Tax Cut) when filing the 2014 federal income tax return.

Increasing for 2014 is the adoption expense tax credit for costs unique to adopting a child, now of up to a maximum of $15,000. In addition, the type of adoption- related expenses that will qualify for the credit has been expanded.

Watch for the following changes in a taxpayer’s situation:

If the taxpayer turned age 65 in 2014, he or she:

• becomes entitled to the age credit, which is calculated based on a $6,916 amount. Reductions of the amount occur for incomes in excess of $34,873.
• may become entitled to the pension income credit, because at age 65 the definition of qualifying income is expanded.
• may be able to split his or her pension income with a spouse, because at age 65 the definition of qualifying income is expanded.

If the taxpayer turned age 71 in 2014:

• check for unused RRSP contribution room. A spousal RRSP contribution can be made until the end of the year in which the spouse turns age 71 and the deduction taken immediately or over time depending on the circumstances.

If a taxpayer’s children turn 18 many deductions and credits are no longer available to the parent. Some may continue if the child is financially dependent by reason of mental or physical disability.

Locate those receipts

Keeping track of receipts ensures taxpayers have the information they need to make appropriate claims. While electronic filing means taxpayers no longer submit receipts with the tax return, retaining receipts is essential because the CRA commonly requests proof to substan- tiate a claim.

Examples where receipts are include:

• The transit credit
• Charitable donations
• Political donations
• Medical expenses
• Childcare costs

Locate last year’s notice of assessment

• Tuition, education and book credits must be claimed by the student before being transferred to a parent or spouse. Any carry-forward amounts can only be claimed by the student. The carry forward amounts are shown on the student’s notice of assessment.
• RRSP contribution room is tracked on the notice of assessment. This is very important because an over- contribution penalty of 1% per month can apply.

Odds and Ends

For 2014 the universal child care benefit (UCCB) is a monthly payment of $100 per eligible child under the age of 6 years, and is made to a parent regardless of income level. The universal child care benefit is being increased in 2015 to $160 per month.

Tax planning should be a year-round exercise; however, when it comes time to file your tax return, care should be taken to ensure that all opportunities are identified and maximized.

Disclaimer:

This commentary is published by the Institute in consultation with an editorial board comprised of recognized authorities in the fields of law, life insurance and estate administration.

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Contributors to this edition:

James W. Kraft, cpa, ca, mtax, tep, cfp, clu, ch.f.c.
Deborah Kraft, mtax, tep, cfp, clu, ch.f.c.