by Renee leNobel | Apr 6, 2016 | Tools & Tips
It’s that time of year again. Busy season for accountants! The Canadian Personal Income Tax filing deadline of April 30, 2016 is approaching quickly!
I was contemplating why it is still so busy for tax preparers as preparing your own taxes is getting easier every year. The tax software is getting cheaper and cheaper (and you can often find free offerings) and it is fairly straight forward to use.
I’ve been wondering why more people don’t prepare their own taxes. I’ve also been on the receiving end of extreme gratitude when I do prepare people’s taxes. The look of relief on some people’s faces when I tell them makes me feel fairly awesome!
I also know a number of people (many people, so don’t think I’m talking about you) that have not prepared their taxes in years. They owe the Canada Revenue Agency many years of tax returns.
Let me be clear, I’m not talking about complicated tax returns. Sometimes if is very wise to hire out to a specialist. It allows you to concentrate on what you are good at. I’m talking about tax returns for people that are employees and/or have a sole proprietorship small business.
What is stopping people from preparing and filing their income tax return?
Everyone has a slightly different excuse or reason, but I think most of them are based in fear.
One fear is that taxes are too hard to prepare, mistakes will be made and the Canada Revenue Agency will come down with heavy penalties and interest for those mistakes.
Other people worry that they may have made too much money during the year and will owe major taxes. On the flip side, some people will realize that they did not make very much money at all and may take that as a indicator of their own self worth. Better just to not think about it as thinking about it leads to painful thoughts!
Another concern is that it preparing taxes will be a lot of work. If you own your own business and you haven’t got a system in place that tracks your revenue and expenses (money coming in and money going out) then it can be fairly daunting to to think about compiling a year’s worth of information! I understand that fear. I have some clients that hand me their receipts in a shoe box and I don’t like doing that type of work so much either. It helps to know that I will get paid.
All these fears stop people from paying attention to a big part of their lives. I’m a firm believer in researching and gathering as much information as possible about things in life. It allows you to make informed decisions, plan better and generally be more successful. If you are burying your head in the sand about your financial situation, it is likely that you are getting yourself stuck and are not as successful as you could be.
So,,, what can you do to get yourself unstuck and start paying attention to your financial situation and taxes?
Well, if it is truly overwhelming, you can hire someone to help you. When choosing an accountant, choose someone that you are comfortable talking to. Ask them to explain what they have done so you could perhaps repeat the process yourself next year or at least start to gain clarity about the process – this often gets rid of fear. Yes, that accountant may charge you by the hour to explain things, but in the long run, you will save yourself lots of money.
I have an even better suggestion though. Why don’t you hire yourself? You would be doing yourself a big favour. Pay yourself to do your taxes. Decide what your time is worth and sit down and tackle those taxes. When you’re done, calculate what you are owed and then go and spend that money on something that is going to make you feel happy. If it makes you happy to put it in the bank account and save it, then do that. That said, one way to get happier is to have memorable experiences, so maybe you can put those earnings towards a fun experience.
Then next year when it comes time to do taxes again you can look forward to it. It’s an opportunity to earn yourself some funds to do something fun.
by Renee leNobel | Mar 23, 2016 | Tools & Tips
My life just got a bit easier with the new 2016 Federal budget that was announced on March 22, 2016.
Under the previous government I had three different calculators to figure out how much people would receive as tax credits and benefits related to their children but this has all disappeared with the new Liberal budget.
Previously, families received the Universal Child Care Benefit (“UCCB”) of $160 per month per child under the age of 6 and $60 per month per child aged 6 to 17. These amounts were taxable and included in the income of the lower earning spouse.
Families received the tax-free Canadian Child Tax Credit of $1,471 per year per child in 2015/2016 that was clawed back completely if your family income exceeded $118,251 (if you had one or two children) or $157,601 if you had three or more children.
There was also a National Child Benefit Supplement of $2,279 per year for the first child, $2,016 per year for the second child that was also clawed back if family income exceeded $26,021.
Finally, each family was eligible for the Children’s Refundable Fitness Tax Credit of $150 per year and Children’s Non-Refundable Arts Credit of $75 per year. These are each being cut in half for 2016 and will be gone by 2017.
To further complicate things, I was usually trying to figure out these amounts so that divorcing couples could figure out how to split these amounts that the government was going to be giving them for their children. These would then need to be outlined in their separation agreements.
Under the new Liberal government, this has all changed and I have to say hooray.
The budget states that families will receive $6,400 per year per child under the age of 6 and $5,400 per year per child aged 6 to 17. These amounts will slowly get clawed back based on adjusted family net income and will disappear completely for families with income exceeding $140,000.
Here is a link to the Liberal’s calculator.
So while I’m happy about the simplicity of the new Liberal Canadian Child Benefit, most families will be happy because they will be receiving more money with this new benefit. The fact that the entire benefit is tied to a family’s income makes it more fair than the system under the old regime where everyone got the UCCB and Fitness and Arts Credits regardless of how low or high their family income was.
by Renee leNobel | Sep 23, 2015 | Tools & Tips
Federal Children’s Fitness Amount Tax Credit
This is the exciting one. This credit has become a refundable credit for the 2015 and subsequent tax years. In prior years, it was non-refundable, that is, it could reduce your taxes owing, but you would not get anything back if you had zero taxes owing. By being refundable, you can now get up to $150 in funds back. The credit is equal to 15% of up to $1,000 in eligible fitness spending per child.
New BC Tax Credits
These ones are not going to make you rich, but will give you funds for dinner and a movie (depending on where you go for dinner). If you are a teacher or parent, please take note and keep your eligible receipts and track your coaching time.
BC Child Fitness Equipment Credit
This new credit is related to the Child Fitness Credit. The BC Child Fitness Credit allows you to claim up to $500 in eligible fitness expenses per child. This non-refundable credit is equal to 5.06% of your eligible claim. This works out to a maximum non-refundable credit of $25.30. The new non-refundable Child Fitness Equipment Credit allows you to claim a further 50% of the Child Fitness Credit or up to $12.65.
BC Education Coaching Tax Credit
The B.C. education coaching tax credit for the 2015 to 2017 tax years provides a non-refundable tax credit of $500 for teachers and teaching assistants who carry out at least 10 hours of extracurricular coaching activity in the year. The maximum claim is $25.30.
by Renee leNobel | Feb 25, 2015 | Tools & Tips
I just finished my first tax return for a family that is eligible for the Family Tax Cut that was announced in October 2014 and affects the 2014 tax year.
What is the Family Tax Cut?
The Cut only applies in certain situations:
- You and your eligible spouse or common-law partner lived in Canada at December 31 of the applicable tax year.
- You have a child that was under 18 at the end of the tax year who normally lives with you and your spouse or partner.
- You and your partner both file a tax return for the year.
- Neither you nor your eligible spouse or common-law partner elected to split eligible pension income for the tax year.
The Family Tax Cut was brought in to equalize taxes paid by families in Canada who have minor children.
The Conservative Government wishes to encourage families that have small children to have one parent stay at home and be caregiver of those children. In this situation there is generally one high income earning spouse and one low income earning spouse.
Because personal income tax rates increase with the level of income of the individual, a family with one high income earning spouse will pay more than a family comprised of two taxpayers who earn equal amounts of income.
The Family Tax Cut is essentially a non-refundable tax credit of up to $2,000 that can be claimed by one taxpayer. It cannot be shared between the taxpaying couple.
If you share parenting of your minor child with a former spouse, you can only take advantage of the Family Tax Cut if you have re-married or are in a new common-law relationship. In this case both you and your former spouse may apply for the Family Tax Cut if your child ordinarily lives with both you and your former spouse throughout the tax year.
There are other rules on eligibility so check with your tax preparer to determine if you are eligible.
It’s that time of year again. Busy season for accountants! The Canadian Personal Income Tax filing deadline of April 30, 2016 is approaching quickly!