Tax Filing Tips for Canadians

Golden piggy bank sitting on income tax form

For some Canadians, income tax season is the most dreaded time of year. It’s a time when you owe the Canadian government, via the Canada Revenue Agency, CRA, a great deal of money.

For others, though, it’s a time of excitement as you await a highly anticipated refund. Many Canadians use their refunds to make lump sum payments on large expenses, pay off last year’s holiday, or just to enjoy a bit of a shopping spree to celebrate their refunds.

Regardless of whether you’re paying in or receiving a refund from your taxes this year, the first step is filing your taxes – and that’s not always a simple matter. These tips for failing taxes in Canada might help you pay less money in or get more money back. Use them well as you prepare to file taxes this year.

Refunds today come in the form of direct deposits. Canada will no longer be issuing cheques for all of the following payments:

  • Canada Child Tax Benefit
  • Canada Pension Plans
  • GST/HST Tax Credits
  • Income Tax refunds
  • Old Age Security
  • Universal Child Care Benefits
  • Working Income Tax Benefits (advanced payments)

Direct Deposit eliminates the hassle of cashing cheques, ensures faster receipt of funds, and eliminates fraud related to mailing and cashing cheques.

Parents with Children May Qualify for many Tax Savings

There are many tax credits available to parents with children that are designed to help you pay for things like child care, college, fitness programs and more. Make sure you’re taking full advantage of the many tax credits, cuts, and benefits available to you, including those listed below.

The Family Tax Cut Credit

While not exactly income splitting, the Family Tax Cut credit allows for a tax credit that is non-refundable, of up to $2,000 by shifting up to $50,000 worth of taxable income to the lower income spouse provided they have an eligible child under the age of 18 residing with them throughout the year.

Children’s Fitness Credit

Tax credit allows you to claim up to $150 per child for participation in eligible sports and fitness activities. Children under the age of 16 are eligible for the program and the maximum credit for the family is $1,000. In order for the program to qualify it must be at least eight weeks in duration and meet weekly during that time. A sports or fitness day camp may qualify provided that it operates five consecutive days.

Canada Child Tax Benefit (CCTB)

This tax credit varies from year to year based on parental income, inflation, and other factors. The tax credit amount is recalculated in July and the payments are divided into 12 monthly payments. In order to continue receiving the benefit, you and your spouse or common-law partner, must file returns on time every year –even if you don’t have an income for that year. Children living at home under the age of 18 may qualify for the tax credit.

Universal Child Care Benefit (UCCB)

Regardless of income, all families may receive up to $160 each month for each child under the age of six. Children between the ages of six and 17 will receive a benefit of $60 per child. This benefit eliminates the child tax benefit of years past, but will have no impact on the Canada Child Tax benefit listed above.

Child Care Deduction

This is different than the UCCB in that it is a deduction rather than a tax credit. It effectively lowers the amount of taxable income of the parent with the lower income by allowing that parent to claim up to $8,000 for each child under the age of seven. Parents are eligible to claim up to $5,000 for each child aged seven to 16 and may claim a deduction of up to $11,000 for children who are eligible for disability.

National Child Benefit Supplement

This federal supplement effects low income families with children under the age of 18. Families receive a monthly payment for each child up to three children. The monthly payment per child is lower for the second and third child and may reduce eligibility for social assistance in many provinces and territories that treat this supplement as income. Families with a net income above $25,584 may experience a reduction in this supplement.

Life Changes that may Affect Your Taxes

As you’ve seen above the life change of having a single child can have a significant impact on your taxes. The birth of a child is not the only change that can affect your federal income tax. The following changes can have a strong effect as well.

  • Becoming a student.
  • Becoming disabled.
  • Buying a home.
  • Changing employment.
  • Dying.
  • Getting an inheritance.
  • Getting married.
  • Going south for the winter.
  • Medical Expenses.
  • Opening a TFSA.
  • Become self-employed.

Many of these things are big deals for you and your family. It makes sense that they might have an impact on your taxes as well. Canadian tax laws are rather complex – as is the filing process. Working with a qualified tax specialist or using an online program to file your taxes can help you avoid costly errors in the filing process that might result in you missing a benefit, deduction, or tax credit you’re eligible for.

You may even qualify for additional cash back by using TurboTax Canada through rakuten Canada where you may qualify for 7.5 percent cash back. Businesses that use QuickBooks Canada to help with their accounting throughout the year can enjoy up to five percent cash back too. Regardless of the life changes that came your way in 2015.

Important Dates for 2015 Tax Filing

Filing deadlines are extremely important. The vast majority of Canadians are required to file their taxes by April 30. Canadians who are self-employed, however, get a slight reprieve for filing taxes until June 15. However, they must still pay their taxes on April 30. June 30 is the deadline for filing a tax free savings account return.

Income Taxes Regarding the Aged

It is vital that you file your taxes each year, regardless of whether you earned income, to see if there might be rrakuten and refunds available to you. As you age, you are eligible for programs, rebates, and refunds you might not be aware of. Additionally, if you are over the age of 60 and living with adult children or other family members who have a net income of less than $20,343 in 2015, you may qualify them for a caregiver among of $4,608 from the federal government as well as additional tax credits from the province or territory where you live.

Pension Sharing

Canadian partners, aged 60 or more, may share their pensions, so that the partner with the lower income actually receives more income. This does not extend to the post-retirement CPP benefit.

Retired couples over the age of 65 have more opportunities to split retirement incomes including:

  • Deferred profit sharing plans.
  • Life annuity payments
  • RRIF payments
  • RRSP annuity payments

These benefits are even available for those over the age of 65 if one spouse had died.

While the benefits may not be all that obvious at first, since this income is taxed upon receipt, it can save thousands of dollars in taxes each year as more of the income is shifted to the partner in the lower tax bracket. Tax software programs, like TurboTax Canada can be highly beneficial at suggesting opportunities to maximise your savings by splitting retirement income.

Registered Retirement Savings Plans and Taxes

One of the most effective ways to reduce your taxes in a given year is to contribute to your RRSP and claim that contribution as a deduction. This type of retirement contribution is allowed to grow tax free as long as the funds remain in your account.

In addition to the benefit of building retirement income for yourself, and for your spouse, you can create regular monthly payments once you retire. You will pay taxes on this income. However, most people retire in a lower tax bracket, meaning you’ll pay less tax on the money after you retire than you would have paid on it at the time when you made the investment.

Another benefit, you might consider a bonus benefit, is that you can borrow up to $25,000 from your RRSP in order to make a down payment on your first home or up to $20,000 to pay for you or your spouse to get an education. You won’t be taxed on the loans as long as you repay them within the designated time frame.

As complex and overwhelming as the tax filing process can be, getting the right help can really simplify things for you. More importantly, getting that help at the right time can help you avoid mistakes that might result in you paying a higher amount of taxes or getting a lower rebate than you actually deserve.

Consider investing in reputable tax preparation software to help ensure that you have all the numbers necessary to ensure a much better outlook and to help you avoid mistakes that run you afoul of the Canadian Revenue Agency.

Don’t forget to get Cash Back even when doing your taxes… CHA CHING!


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