Archives for Taxes

Tax Preparation Clinics in Your Community

  

For people with a disability the BC Coalition for People with a Disability is hosting free tax preparation clinics. Please see THE BCCPWD BLOG for more information.

The Canada Revenue Agency also lists all the  Community Volunteer Income Tax Program locations in Canada at:

http://www.cra-arc.gc.ca/tx/ndvdls/vlntr/menu-eng.html

CRA – Tax Tips for Everyone

  

Canada Revenue Agency (CRA) has a tax tips webpage
with new 2011 tax year hints, tips and contact information.  There is a
list of all the credits, deductions and benefits administered by the
CRA.

The CRA also has a link for all the topics of interest for people with a disability or people who support someone with a disability.

http://www.cra-arc.gc.ca/tx/ndvdls/sgmnts/dsblts/menu-eng.html 

Tax Tips for Workers with a Disability

  

Thanks to the Tax Detective, here are some tax tips for the person with a disability who decides to work, even for a low amount of income. There are incentives to work, some new, some old, in the tax system. Some government benefit programs are dependent on the calculation of net income and may be affected by increased net income, but there are several claims for expenses that may reduce the calculation of net income. 

A program for the working poor, Working Income Tax Benefit will actually pre-pay benefits if you can figure out how to claim. More information: Line 453 WIT

Medical Expenses

By claiming medical expenses you may find a supplement you are entitled to, a credit of a bit over $1,000 per year…see Line 452: Refundable Medical Expense Supplement

Child Care
If you work and pay for Child Care, child care is usually only deductible by the lower income spouse, unless there are extenuating circumstances, such as a parent in school, infirm, jail or hospital.  The result of claiming child care is to lower net income. If the claimant is a person with a disability, reducing their net income will aid in preserving tax credits for a claim by a supporting spouse or other family members and may also reduce the impact on other government benefit programs that rely on the calculation of net income, such as Persons with Disability Benefits, Pharmacare and MSP premiums.

Disability Supports Expense
If a person with a disability works and has specific medical expenses that qualify, including attendant care and various devices and equipment,  they may be claimed on Line 215 to reduce net income. All qualifying medical expenses are listed HERE.

A benefit of disability supports expense claims is other credits such as the disability tax credit may still transferrable to supportive family because net income is lower than the total of other credits.
The family may also claim other credits such as the caregiver or infirm over 18 tax credits. These credits are all dependent on the calculation of net income, so it makes sense that if the disability supports reduce net income, this is a good thing.
Normally medical expenses don’t reduce net income. They are reported on Line 330 as a medical expense credit and the taxpayer must deduct 3% of their net income or on Line 331 if paid by the supportive relative net of 3% of the net income of the person with the disability who is supported.
Only the person with the disability can claim Disability Supports on Line 215 and only for the calendar year. There is no carry over for 24 months in year of death or flexibility of claiming any 12 months that end in the year, or having their spouse claim instead if it’s more advantageous, all of which are possible with medical expenses, both on Line 330 for self, or if paid by someone else on Line 331 net of 3% of the supported persons’ net income.
Eileen Reppenhagen, CGA, ACG, CL
www.taxdetective.ca

RDSP Resource Centre

  

The RDSP Resource Centre has a website and help desk to assist people in understanding, qualifying for, and setting up their RDSPs. You’ll find news, detailed information, tips and discussion.  

If your question isn’t answered on the website, call or email.

Telephone: 604-630-0333 or toll free 1-855-773-RDSP (7377)

Website: www.rdspresource.ca 

What to do if government payments to your RDSP are delayed

  

The payment of Canada Disability Savings Bonds and Grants – the federal government contributions – are sometimes delayed in being deposited into people’s RDSPs.  Usually the problem is not serious, however, it also usually won’t be rectified if you don’t do anything about it.

I recently did a detailed post on why government payments are delayed and what you can do about it.  You can read it here:  http://rdspresource.ca/index.php/2011/09/delays-in-the-payment-of-grant-or-bond/

Qualified Medical Practitioners now have additional assistance via video explanations

  

CRA has added to their video collection, completing the full set of video’s about each of the different types of disability criteria.  These video’s are posted under the information available for qualified medical practitioners, look under the different types of medical conditions as this link:

http://www.cra-arc.gc.ca/tx/ndvdls/sgmnts/dsblts/qlfd-prcts/dtrmnng/menu-eng.html

Tip:  the criteria for disability is either the inability to function, all or substantially all of the time, as in 90% or more for a marked restriction … OR that it takes an inordinate amount of time to complete a function. 

If the patient doesn’t meet the marked restriction test, review for cumulative effect, as the effect of the impairment must meet a test of significant restriction, which equates to a marked restriction when two or more impairments are evident.  Cumulative effect is effective from the year 2005 forward and certification may be provided by physiotherapists in some cases, or certification by a combination of QP’s may be required.

What can I claim as a medical expense on my taxes?

  

What can I claim as a medical expense?

You can claim the total eligible medical expenses you or your spouse or common-law partner paid for:

  • Yourself
  • Your spouse or common-law partner; or
  • Your or your spouse’s or common-law partner’s children born in 1992 or later and who depended on you for support
  • Your or your spouse’s or common-law partner’s child who was born in 1991 or earlier, or grandchild; or
  • Your
    or your spouse’s or common-law partner’s parent, grandparent, brother,
    sister, aunt, uncle, niece, or nephew who was a resident of Canada at
    any time in the year

Along with prescribed medications, medical expenses you can claim
include travel expenses for medical services, respite care expenses,
homeopathic services, tutoring services, ambulance transport, and costs
associated with seizure response dogs. Below is a list of medical
expenses you can and cannot claim in your tax return.

Expenses you can claim: http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/ncm-tx/rtrn/cmpltng/ddctns/lns300-350/330/llwbl-eng.html

Expenses you cannot claim: http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/ncm-tx/rtrn/cmpltng/ddctns/lns300-350/330/ntllwbl-eng.html

An authorized medical practitioner must prescribe expenses and
original receipts must support claims. Eligible expenses must have been
paid in the claim period and any reimbursements from insurance
companies, work medical plans, etc. must be deducted from the amount
claimed.

For more information about medical expenses, read this Canadian Revenue Agency (CRA) webpage.

Save even MORE money with your child’s RESP

  

Canada Education Savings Programs (CESP)

If you are saving for a child’s education, the Government of Canada will help you with special saving incentives that are only available if you have an RESP.   See more at:

http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/resp-reee/cesp-pcee/menu-eng.html

Free On-Line Software for students and people with simple tax returns

  

I have always found TurboTax (previously known at QuickTax) easy to use and if you are a student or have a simple tax return, you can use the on-line version for free:

Do you Qualify to use the free version?*

TurboTax now offers 2 totally free ways for many Canadians to prepare
their taxes: TurboTax Free Online Edition and TurboTax Student Online
Edition. Find out if you qualify to use either solution here.

TURBOTAX FREE ONLINE EDITION – For Income-Only Tax Returns
You can use TurboTax Free Online Edition if:

  • You Earned Income: You receive T-slips, like T4s & T4As. You may have have tip income and/or pension income.
    • You are not self-employed. 
    • You do not have investment income or RRSPs.
    • You have not made any charitable donations or investments.
  • You Have Simple Deductions: You receive only ‘standard’ federal & provincial deductions.

TURBOTAX STUDENT ONLINE EDITION – For Post-Secondary Student Tax Returns
You can use TurboTax Student Online Edition if:

  • You Were a Student in 2011: You paid tuition fees during the 2010 calendar year and you hold a T2202A, TL11 or its equivalent.
  • You Made Under $20K: Your household income does not exceed $20,000 gross (that is, before taxes).

*This tip was updated March 2012

Make your RDSP Contribution early this year !

  

The Registered Disability Savings Plan (RDSP) was introduced by the
government of Canada to help families and people with disabilities save
for their long-term financial security.

The benefits of saving in an RDSP:

Contributions to an RDSP are not tax-deductible, but they grow within
the plan on a tax-deferred basis. In addition, contributions may be
eligible for the Canada Disability Savings Grant (the grant) and the
plan may be eligible for the Canada Disability Savings Bond (the bond).
The grant provides matching contributions; no contributions are required
for lower income individuals/families to receive the bond. Together,
they could add up to $90,000 to your RDSP.

There is a lifetime contribution limit of $200,000 per beneficiary and no annual contribution limit.

Note that withdrawals trigger the repayment of any grant or bond received during the previous 10 years.

Making the most of your RDSP:

Here are some age-related strategies that may help you maximize the value of your plan, depending on your circumstances.

When the beneficiary is a young child:

  • Make contributions that attract the grant as early as possible, to
    maximize tax-deferred growth and to minimize the effect of the grant
    “clawback” — if a withdrawal is made, any grant payments received in the previous 10 years must be paid back.
  • Try to make an annual contribution large enough to attract the
    maximum matching grant contributions. The earlier you start, the better chance you will have of reaching the maximum grant amount of $70,000.
  • The tax-deferred status of contributions makes the RDSP an ideal
    way to invest in long-term solutions like a growth oriented mutual fund.

When the beneficiary is a young adult:

  • Try to contribute every year because the grant and bond cannot be
    received following the year the beneficiary turns age 49.  Even if there is no intention to contribute, the bond can be maximized simply by opening the plan early enough.
  • Upon reaching the age of majority, a beneficiary who is capable of
    managing his or her own finances can become the holder of his or her
    own plan. This isn’t compulsory, however. If you are the parent and have been the holder while the beneficiary was a minor, you can continue as holder.
  • At this stage, an investment solution that strikes the right balance
    between growth and safety may make sense depending on when withdrawals are planned.

When the beneficiary is a mature adult (40+):

  • Contributions to an RDSP do not qualify for grant contributions
    following the year the beneficiary turns 49. In addition, plans are not
    eligible for the bond after this time.  But beneficiaries can still
    benefit from tax-deferred growth by contributing up until the year they turn age 59.
  • Lifetime Disability Assistance Payments (LDAPs ***See explanation below) can begin at any age but must begin by the end of the year in which the
    beneficiary turns age 60. Consider waiting at least 10 years after the
    final grant and bond have been received into the plan before requesting LDAPs; otherwise, the grant and bond payments received in the previous 10 years will have to be returned to the government.
  • The portion of the LDAP consisting of grant, bond and investment
    income is taxable at the beneficiary’s marginal rate, which may
    influence the decision to begin payments. For example, if the
    beneficiary’s marginal tax rate is likely to decrease at retirement age,
    it may be advantageous to delay LDAPs until that time.
  • More conservative investment options, including those that generate
    regular tax-efficient income while providing some growth to offset
    inflation, should be considered as payments from the RDSP must begin.