Tung Shanghera Accounting Solutions Bookkeeping taxes tax firm

Tung Shanghera Accounting Solutions
9 Tax Tips for Personal Tax Season

9 Tax Tips for Personal Tax Season

1
 Income splitting

Income splitting can be the key to saving thousands in taxes. It shifts income from the higher earning spouse to the lower spouse meaning that a lower tax rate is paid. Couples who have at least one child under 18 can effectively transfer up to $50,000 of taxable income to their lower-income partner and claim a non-refundable tax credit up to $2,000.

2
Donations

Don’t split donations on spouse’s tax returns. They should all be claimed on one return. It does not matter who the donation receipt is made out to.

3
 RRSP contributions

RRSP contributions should be made earlier as opposed to later. This allows for a longer period of growth. There is no need to wait until the deadline. Also, if you have reached your contribution limit there is the ability to contribute to spouse’s RRSP. However, there is another alternative. Tax rules allow you to contribute up to $2,000 more than what you’re eligible to contribute to your RRSP without attracting the usual excess contribution penalty, which is one per cent of the excess amount for every month of the contribution year that it stays in the RRSP. The benefit of this is that even though you can’t deduct the $2,000 over-contribution, it could be residing inside your RRSP for many years, continuing to grow on a tax-deferred basis as long as it’s in the plan. That $2,000 excess contribution can be deducted in a future year when your actual RRSP contribution is less than the maximum you’re allowed to put in.

4
 Make full use of medical expenses

Medical expenses should always be claimed by the lower earning spouse. However, you should also make sure you claim everything you are entitled to. Medical expenses are one of the most overlooked tax opportunities out there. Many people don’t bother to add everything up because of the income- related threshold: only expenses that exceed the lesser of $2,208 or three per cent of net income can be claimed. But what they don’t realize is that there’s a long list of expenses that qualify. Travel, training and renovations are all potential items that could be eligible. Please see the CRA website for an extensive list or contact us for any clarification.

Related: http://www.tsascpa.com/make-your-rrsp-work-for-you/
relax-1280x720

5
 Make sure to use all available tax credits

There are a number of tax credits that can be transferred between spouses. Similarly, students have several credits (tuition, education and textbook) that can be transferred to parents and even grandparents once they have used them to first reduce their own taxes payable to zero. Alternatively, the student can carry the credits indefinitely.

6
 Make sure all T-slips are reported to CRA

At times you may file your return and later discover that you’ve failed to include a T-slip reporting income or a dividend payment. The assumption is made that no need to report the slip to CRA since they will have the slip anyway. This is not the case and can result in a penalty.

If you fail to report income in 2014 and also failed to report income just once in any of the three previous years, you can be nailed with what’s called a “repeated failure to report income penalty.”

The penalty, which is automatically generated by the CRA’s computers, is 20 per cent of the amount you fail to report

7
 Zero income does not mean you don’t need to file a tax return

Some low- or zero-income earners still think there’s no need to file a return. This misunderstanding can cost thousands of dollars in lost benefits and credits like the GST/HST credit and the Canada Child Tax Benefit. More and more benefits are being distributed through the tax system these days. So, if no return is filed, no benefits get sent.

8
 Realize capital losses to offset current year capital gains

If you have realized capital gains in the current year and unrecognized capital losses in other investments, consider disposing of the loss investments prior to the end of the calendar year in order to offset the capital gains. Similarly, those losses could be carried back to the preceding three years to reduce the capital gains in those years. That would result in additional tax refunds.

9
 Invest in companies that pay out dividends versus interest

Dividends, after the dividend tax credit, may result in a better return than interest that is taxed fully.

Related Post

Administrative Penalty for Late Filing T4s and T5s for Your Employees

Administrative Penalty for Late Filing T4s and T5s for Your Employees

T4, T5 and certain other slips must be distributed and filed, on or before the last day of February following the calendar year to which the slips apply.  If the last day of February falls on a Saturday or Sunday or public holiday, the tax slips and returns are considered on time if postmarked on

READ MORE
Personal Tax Return Checklist

Personal Tax Return Checklist

Personal Tax Planning Checklist  Personal Tax Return Checklist (downloadable version) Note: It is your responsibility to ensure all information is complete and accurate. We are not responsible for errors or omissions that result from incomplete or inaccurate information. PREPARE A SEPARATE FORM FOR EACH TAXPAYER Name:                                                                                                                                                   Address:                                                                                                                                              Phone #:                                                                                                                                              Email:                                                                                                                                                     

READ MORE

Share This

Do you know anyone who could use our services?