The annual tax filing ritual is again upon us. For individuals, this year’s due date for filing a return and making tax payment is Thursday, April 30. For someone who runs a business, as well as for that person’s spouse, the tax return due date is Monday, June 15, though any tax payments remain due by April 30.
This year sees the introduction of the much-anticipated Family Tax Cut, announced in the Fall 2014 Economic Statement along with a number of measures directed at families with children.
We’ve also included a few items we felt worth reiterating from recent years, a heads-up as to what may attract an audit and a shout-out to the Canada Revenue Agency (CRA) concerning its evolving efforts to improve communications with taxpayers.
Families with children
Family Tax Cut
Parents with children under the age of 18 will be able to take advantage of the Family Tax Cut. This is the follow-through on the Conservative Party’s proposal from the 2011 election campaign. Initially positioned as “income splitting,” the enacted measure is in the form of a tax credit.
Using new Schedule 1A, parents first calculate their federal tax due (less tax credits) without reference to this provision. A second step then performs the calculation on the basis of shifting up to $50,000 of income from one spouse to the other. The net reduction in tax on the second step may then be claimed as a tax credit, though capped at $2,000.
Universal Child Care Benefit (UCCB)
Effective January 1, 2015, the monthly UCCB payment increased from $100 to $160 for each child under age six and now includes $60 for each child aged six to 17. For clarity, this amount is not claimed on the tax return, but is rather paid as a taxable monthly instalment to the lower-income parent. There will be a catch-up payment in July 2015 to cover the first six months of 2015, with continuing monthly payments thereafter.
Child Tax Credit (CTC)
In conjunction with the changes to the UCCB, the CTC is being repealed after the 2014 tax year. This means that parents will still be able to claim this tax credit for each child under age 18 when filing this April, with the credit being worth $338 per child.
Children’s Fitness Tax Credit
The qualifying amount of this credit has doubled to $1,000. As the credit is based on the lowest-bracket rate, the value of this change is up to $75.
Child Care Expense Deduction
An additional $1,000 may be claimed (generally by the lower-income parent) for child care expenses. As a deduction rather than a credit, this is worth the value of the federal taxes saved, so potentially as much as $290.
Worth repeating from recent years
Foreign income reporting
Changes to the T1135 Foreign Income Verification Statement form and reporting process were announced in the 2013 Federal Budget. The reporting process during 2014 (with respect to 2013) was further adjusted a couple of times, including amendments to the form itself (streamlining the reporting of securities held in Canadian brokerage accounts) and extension of filing dates.
For 2014 reporting, the T1135 form is due with a person’s tax return, which can now be filed electronically.
First-Time Donor’s Super Credit
This credit, announced in the 2013 Federal Budget, can be claimed only once from 2013 to 2017. It allows an additional 25% tax credit on charitable donations made in cash up to $1,000. This applies to the federal credit only. To qualify, neither the taxpayer nor his/her spouse or common-law partner may have claimed any amount of the charitable donation tax credit in any of the five preceding tax years.
What might attract an audit?
Each January the CRA conducts a letter writing campaign to make taxpayers aware of what activities its auditors will be focusing on in the coming season. This year the focus will be on those who claim business losses, rental losses and employment expenses on line 229.
Letters are sent to a sample list of taxpayers who might come under scrutiny based on their past filed tax returns. The fact that a taxpayer receives a letter does not mean that the person will necessarily be audited.
Communications with CRA
The CRA has been highlighting its efforts to better communicate with taxpayers, both in its adoption of emerging technology and engagement in social media, such as:
- MyCRA mobile app – Secure access to view key tax information, such as notices of assessment, tax return status, and RRSP and TFSA contribution room. (Due for release in February 2015, but still pending at time of writing in early March)
- MyCRA business app – Create custom reminders and alerts for key CRA due dates related to instalment payments, returns and remittances
- Online mail – Instant access to your tax records anytime, anywhere, rather than having to rely on paper correspondence. Register online through “CRA My Account,” or simply by providing an e-mail address and permission on your tax return
More information can be found on the CRA website at www.cra-arc.gc.ca/nwsrm/txtps/2014/tt141208-eng.html.