10 things to know when preparing your tax return Add to.
Today, I want to provide an education on a bunch of little things that can actually make a difference. I’m talking about things to keep in mind when preparing your tax return. No, these things individually won’t make you wealthy, but the money is better in your pocket than the taxman’s.
1. File for a child who earned income. If your child earned any income at all – babysitting, delivering papers, or whatever – make sure he files a return. If he earned under $10,527 in 2011 he’ll have no tax to pay, but he’ll create RRSP contribution room to save tax later, and he might be entitled to cash back from certain refundable tax credits.
2. Claim medical expenses and donations on one return. You’ll save more tax if you claim all donations on one spouse’s return rather than splitting them. In addition, you're only entitled to claim medical expenses that exceed 3 per cent of your income, or $2,052 (whichever is less), so you’ll be able to claim more on the lower-income spouse’s return.
3. Report your business activities even if you earned nothing. If you started a business in 2011 and incurred some expenses related to it, be sure to claim those expenses even if you earned no revenue in 2011. The loss will offset other income you might have and will save you tax.
4. Defer claiming your RRSP deduction in some cases. If you contributed to your RRSP for 2011 you may be thinking of claiming your RRSP deduction on your 2011 tax return. Consider saving that deduction for a future year if you expect to have a much higher income in the next couple of years. This deduction could save you more tax this way.
5. Transfer credits from a family member. To the extent your spouse is not able to use certain tax credits, they can be transferred to you (tuition, education, textbook, pension, disability and age credits come to
mind). Also, up to $5,000 of tuition, education and textbook amounts can be transferred from a student to a parent if the student doesn’t need them.
6. Split pension income with your spouse. You can move up to 50 per cent of eligible pension income to the hands of your spouse. This can allow your spouse to make use of the pension credit to shelter some of that income and can save tax overall.
7. Consider reporting your car allowance as income. If you’ve received a non-taxable car allowance but have incurred significant car expenses in 2011 you have the option of including that allowance in your income and claiming a portion of your actual car expenses. This could save you tax where the total expenses claimed is greater than the allowance you received.
8. Remember to claim a GST/HST rebate. If you incurred employment expenses that you’re deducting on Form 777 for 2011, don’t forget to claim a rebate for the GST/HST related to those expenses. Claim this by filing Form GST370. Your employer must be a GST/HST registrant and not be exempt from these taxes for you to be eligible for the rebate.
9. Audit your own tax return. If you hope to avoid a tax audit, audit your own return before filing. Check it for mathematical accuracy and ensure all information is complete. Also, check for lines on your tax return than look significantly different from prior years and make sure your numbers are right and that you can explain the differences.
10. File your return electronically. Filing your return electronically will help you to get a refund more quickly. It will also allow you to avoid sending in that wad of receipts that no man-made staple can go through. Finally, it will generally result in a quicker notice of assessment, which starts the three-year clock (after which your return is generally statute barred, which effectively means CRA can’t generally make changes to your return) sooner.Source: www.theglobeandmail.com