Tax filing – Page 6 – Doug Carroll

From cake prep to tax prep – Is there an app for that?

As I completed my tax return recently, I found myself amazed at how much the preparation and filing processes have changed since I first became a filer. And that’s not just because I was jockeying screen time with a 4, 6, and 8-year-old to get it done — at least not entirely.

As I multi-tasked one weekend through taxes, spring hockey confirmation and summer-camp registration, I envisioned that old TV commercial where the retired future self visits the current self. I had to laugh: I could have been cast in either role at that moment.

Personal evolution

That old commercial ran back in the 1980s, which is when I prepared my first tax return. The various parts of the package lay spread across the dining table, and I laboured through it by hand — only using a calculator at the end to double-check the results.

Not surprisingly, my parents did it the other way round — for decades trusting their own arithmetic skills over the new-fangled plastic box with a dozen or so buttons. Imagine them now — well into their 80s — jostling with today’s tax-preparation software.

That software can be like a black box. Many people might feel locked out of knowing what’s going on under the hood when they’re led step-by-step, Q&A-style, through a tax return.

To complete, just add eggs

After you go through the Q&A, the last step is to file the return. In my case, I intended to use the CRA’s Netfile service, which as taxpayer I must do through a secure connection, without the intervention of the software.

As I downloaded the zipped file and got ready to click the confirm button, I couldn’t help but think of Betty Crocker. You see, General Mills had been successfully selling pre-made food for a couple of decades by 1952, but their cake mix was not taking hold. As the folklore goes, a young executive suggested removing the powdered egg would allow the homemaker to add fresh eggs and feel the pride of ownership of the final product. Voila!

Of course, the security of filing one’s taxes is a legal matter, not an instance of marketing magic. And unlike the ingredients already in the cake box, the taxpayer is responsible for the inputs that feed into the software, and personally liable for that final click.

So: zip, click, file, confirm – The whole exercise, personal distractions and all, took me less time than Saturday-morning cartoons.

Ironically, our youngest is allergic to eggs, and thus can’t have those prepared mixes. So on this same morning as I was doing my digital duty, my better half (she really is) was making muffins from scratch. Technology’s great for tax prep, but nothing beats homemade muffins.

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There is an app for that, for tax preparation that is

Current offerings are fairly limited in their scope however, allowing only very basic return preparation using that method. Even with the general software and web services, one should be careful where discretion or qualitative judgment may be required, such as for rental properties, foreign income or business filers. Tax preparation software may be fine where things are straightforward, but in these kinds of situations, a human professional should be consulted.

Filing your 2011 taxes – What’s new, what’s noteworthy

It’s just about time for your annual re-acquaintance with the Canada Revenue Agency (CRA). Circle Monday, April 30th to get your return and tax payment in, though if you or your spouse runs a business, the return itself may not be due until Friday, June 15th.

Per usual, there are some new opportunities and obligations this season. Below is a very brief summary of some key federal tax items to look out for, and an outline of some CRA services that can make the reporting relationship as seamless and painless as possible.

Opportunities

Children’s arts tax credit

This is a complement to the existing Children’s Fitness Tax Credit. Parents may obtain a tax credit worth up to $75 for each child under 16 enrolled in a qualifying program such as arts instruction, cultural knowledge or nature training. An additional $75 worth of tax credit may be available if the child is under 18 and qualifies for the disability amount.

Volunteer firefighters tax credit

Volunteer firefighters may be able to reduce their tax bill by as much as $450 if they have completed at least 200 hours of eligible volunteer time. If that person has received and claimed an income exemption for certain payments made with respect to the volunteer firefighter duties, he or she may be precluded from claiming this credit.

Allowable amount of medical expenses for other dependants

The $10,000 limit per eligible dependant has been removed. Eligible dependants in relation to either spouse may include a child, grandchild, parent, grandparent, brother, sister, aunt, uncle, niece, or nephew who was a resident of Canada at any time in the year.

Flow-through shares

Under a flow-through share agreement, an investor may be entitled to claim tax credits that have been renounced by an originally entitled claimant. Eligibility for such treatment is generally subject to annual renewal by the government. In the 2011 Federal Budget, eligibility for the mineral exploration tax credit was extended to flow-through share agreements entered into before April 1, 2012.

Obligations

Donation of flow-through shares

The inclusion rate for deemed capital gains is 0% for a broad list of marketable securities when donated in-kind to a registered charity. As announced in the 2011 Federal Budget, this same treatment will not continue for the donation of certain flow-through share properties made after March 21, 2011. A prescribed formula is now used to calculate if and to what extent a 50% inclusion rate applies to such deemed capital gains.

Split income of a child under 18

The tax on split income, informally known as the ‘kiddie tax’, was extended in the 2011 Federal Budget. After March 21, 2011, a capital gain from the disposition of shares to which this split income tax would have applied (had there been a dividend) will now be deemed to apply to such a transaction.

Ready to file?

CRA website carousel

On the CRA website www.cra-arc.gc.ca, scroll through the front carousel until you get to the image of the clipboard with the linked headline, “These five steps will help you get the most out of your 2011 income tax return.” This will take you to the hub of 2011 filing information on the site, including further items and greater detail beyond the brief summary provided in this article.

My Account

This CRA service offering was featured in detail in our April 2010 Tax & Estate matters article. Basically it’s their 21/7 (allowing for maintenance time I guess) portal for tracking your personal tax and benefit information.

Recently announced, you can now view T4 and T4A information in My Account.

If you’re not yet registered for My Account and want to use it as part of this year’s filing exercise, you should get on it right away. The process cannot be done entirely online, in that CRA mails out an interim password that must then be used to activate the account. The expectation is that you will receive this within 5 days (Canada or the US), but if you have moved recently (as I had when I activated mine a few years back), then it could take longer to iron out.

Netfile

As promoted by CRA, this is the quick, easy and secure way to get your tax return filed – and to get your refund faster. A four-digit Netfile access code is printed on the information sheet of your T1 personal income tax return package.

Tax preparation software and web services that are compatible with Netfile will be marked as “NETFILE-certified”. Be aware that this merely indicates technical compatibility, and is not an endorsement of the product itself.

Tax relief in troubled times

Tsunamis in Japan. Tornados across the U.S. Flooding on the prairies.

Natural disasters wreak havoc wherever they hit, uprooting whatever and whoever stands in their way. Beyond the physical devastation, they pose both immediate and lingering threats to life, limb and livelihood.

Fortunately on the tax front, there is both recognition and relief for those struck by such events.

When can you seek relief?

Taxpayer relief is available in a variety of circumstances, including a serious sickness or death in the family, a postal service disruption, an error by the Canada Revenue Agency (CRA) or the occurrence of a natural disaster.

In the case of natural disasters, CRA will generally issue a press release to proactively advise the public of the potential availability of tax relief. Two such notices were issued on April 28, 2011, just prior to the May 2, 2011 individual filing and tax payment deadline. One of the notices referenced domestic spring flooding and the other adverted to the earthquake, tsunami and nuclear crisis in Japan.

What relief is available?

Taxpayer relief is a discretionary power of the Minister of National Revenue, exercised through CRA. Where taxpayers are unable to meet their tax obligations due to circumstances beyond their control, relief may be granted in the form of:

Cancellation or waiver of penalties and/or interest;
Acceptance of certain late-filed, amended, or revoked elections; and/or
Issuance of income tax refunds or reductions to amount payable beyond the normal three-year period

In the face of a natural disaster, particularly one occurring in the early months of the year, the most obvious immediate impact will be on timely filing of a return and payment of any taxes due. Absent the relief provisions, a taxpayer could face costly penalties and interest, and lose out on potentially beneficial tax elections. For reference, the minimum late-filing penalty is 5% of the taxes owing, and compound daily interest begins being charged on outstanding taxes on May 3, 2011, currently at a rate of 5% per annum.

In extraordinary circumstances, CRA will extend the filing deadline rather than resort to the taxpayer relief provisions. As a recent example, the deadline was extended to June 1, 2009 (with respect to the 2008 taxation year) for all Manitoba residents living in designated flood-ravaged areas.

How does one apply?

A taxpayer should submit a relief request in writing to the Intake Centre (there are five of them) responsible for the province of residence. CRA recommends the use of Form RC4288, Request for Taxpayer Relief, which includes an explanation of the procedure, glossary of terms, addresses of the Intake Centres and other relevant guidance that could assist in the timely processing of the application.

While the suggested form is not mandatory, be aware that the application must be reviewed by an assigned officer who is responsible for assuring that all information and documentation is complete. The use of this form may thus streamline the process, and lead to an early response.

Finally, bear in mind that the relief provisions are indeed discretionary and that each case is reviewed on the merits of its facts. Accordingly, a taxpayer should not merely rely on the occasioning of the disaster as a guarantee that relief will be granted. Showing a clear connection between the events and the inability to fulfill the tax obligations – including the taxpayer’s diligence in attempting to do so – will contribute to the chances of reaching a satisfactory resolution.