Thursday, May 28, 2015

Oops! 10 Common Canada Tax Return Boo boos

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Canadians file a T1 general income tax return each year on April 30th. the Canadian income tax law is similar to that of the United States, but the form is a little bit simpler For the taxpayer.Yet there are some common mistakes and things forgotten when it comes to filing the t1 general with the CRA Canada Revenue Agency. Here they are:

1. Forgetting to disclose foreign property worth over $100,000 Canadian. 

When checking off the box on the T one that asks if you have property worth over $100,000 outside of Canada, most people assume that relates to only real estate. That is not true. If you have funds in foreign bank accounts, shares of foreign corporations, interests in foreign mutual funds, foreign trusts, life insurance policies issued by a foreign insurer, tangible or intangible property located outside of Canada, or even precious metals such as gold or silver held outside of Canada, this includes jewelry in a safety deposit box in another country, you must report these items. Just like filing a FBARs in the United States, the CRA is looking for the aggregate value which means if you add them up together and if equals more than $100,000, you have to report everything.  The 100 thousand dollar limit is in Canadian funds of course. A T 1135 must be filed each year and there are some serious penalties for not filing.

2. Forgot income from a foreign bank or source. 

If you have a foreign bank account, even if it is less than $100,000 Canadian, you still must report income worldwide if you are a Canadian resident. This also applies for any income made while on vacation in the US, or any other income made worldwide or paid from another country from online sources such as Google for you youtube or eBay.

3. Travel medical insurance. 

If you travel to the US or any other country and have to purchase travel medical insurance, you can write that off just like prescription drugs and tutoring for children so long as there is a doctors note to back it up. You can also claim transportation expenses for trips more than 40 kilometers to receive health care treatments. Make sure that you keep all receipts for any medical deductions you take on your T 1 general tax return.

4. Children's art tax credit and fitness credit.

 If your child was involved in programs related to art, culture or recreation you can claim up to $500 per child if you are claiming them as a dependent on your tax return. There are so many different programs that qualify for the children's art tax credits, be sure to ask your child's program coordinator. These can be activities like gymnastics, hockey, soccer, or even Boy Scouts and Girl Scouts and 4h.

5. Employment related expenses. 

To claim employment related expenses, you must talk to your employer and get a signed T2200 in order for the tax deduction to be allowed on the employee paid expenses related to work. Don't bother trying to get creative and write off anything that is not designated on the T 2200 . the CRA scrutinizes employee related expenses and will not allow anything without a T2200.

6. Transit passes. 

you can deduct transit passes on your T 1 general Canada tax return. These include bus passes, train passes, or any method of public transportation. Make sure that you keep receipts of these transit passes when including them on your Taxes.

7. Splitting pension income. 

If one spouse has much less income than the other , pension splitting can be an effective way to reduce tax liability between two people. You are allowed to sign half of your CPP benefits to your spouse if you are both over 60. You can also split other income such as rental income or capital gains so long as both people are on title to the property. Income from RRSP deposits maybe split to as long as you make an election to do so each year. Make sure you plan wisely for these things as I can get difficult.

8. Capital gains from U.S. home sales. 


Did you sell a house in the US? Again, Canada taxes its residents based on worldwide income, so if you sold property in another country, you must report it on your T 1 general Canada income tax return. This commonly gets conveniently overlooked by Canadians selling US property.

9. Moving expenses. 

Take the distance from your old home to your old work place. Now take the distance from your old phone to your new workplace. if your new workplace is at least 40 kilometers closer to your new home, you can write off moving expenses if you moved for work purposes. This includes moving out of country. You can write off meals and lodging per diem or the actual travel expenses as well as the cost of moving ie a moving van or moving crew.

10. Student loan interest. 


You can write off student loan interest on your T1 general Canada tax return. This is probably the only good thing about student loans (or not paying them off as fast as you'd like). 



There are quite a few loopholes and areas in the Canadian tax return that most taxpayers either miss, forget about, or conveniently don't report hoping no one asks about it. When preparing taxes, it's always best to use a professional income tax preparer to navigate through all these easy to miss items which can turn into huge problems down the road. Dymas Services Limited operates in Calgary and can do Canada tax returns from anywhere in Canada. Get a hold of us, we'd love to discuss possible tax savings and we can go multiple years back in filing your taxes.

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