Tax Tweet - Commonly Missed Deductions

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Doing our own taxes these days is so much easier with the new and improved tax software currently on the market. It simplifies the personal tax preparation process and what used to take hours to prepare can now be completed in a matter of 20 minutes. For most people, this is good. Or is it?

While most tax software can simplify the tax preparation process, it cannot replace the expertise of a knowledgeable tax accountant. Often times, I see clients that have prepared their own taxes in the past and have overpaid taxes unnecessarily. In these cases, I really enjoy being the bearer of "good news" when I inform them of their additional refund, however, I often wonder how many others are funding CRA's budget by overpaying their fair share. Most people who prepare taxes on thier own, do so because their return is a basic return. Now, the average price for a tax return software package ranges from $40-$60 and this must be purchased each year. A basic individual tax return ranges from $60-$100, depending on the complexity, and since most people who do their own taxes are typically basic returns, the average is probably closer to $60. Does it make sense to purchase a software package to do your own return versus paying for a professional tax accountant to prepare and e-file it for you? 

For some, the answer is still yes, and this post is for you. I want to highlight a few deductions that I often find overlooked on client returns that have prepared their own in the past. 

Commonly Overlooked Deductions

1) Moving Expenses - if at any time during the year, you had to relocate and the your new home is 40 kms closer to your new place of work, or your new educational facility, then you may be eligible to claim moving expenses on your taxes. The form used is called a T1M and can be found here. The CRA also outlines the eligible moving expenses you can claim as well as expenses that you cannot deduct.


2) Children's Fitness Amount - There is a maximum claim amount of $500 per child in 2012 for registration fees paid to a prescribed program of physical activity. If you have a child and pay fees for recreation, sport or other fitness program, it is worth your while to check this tax credit out to see if the program is a prescribed program. CRA has produced a short video on this explaining how this works CLICK HERE TO SEE VIDEO

3) Amount for Eligible Dependent - For some situations, separated or divorced parents who have lived without a spouse or common law partner anytime in the previous tax year, may be able to claim the amount for an eligible dependent. This claim can be huge. In 2011, the non-refundable tax credit was $10, 527 which would result in a reduction of federal tax payable of $1579 as well as an additional provincial tax credit, depending on your province or territory. In New Brunswick the provincial tax credit is about $958 for a combined tax reduction of $2537. 

There are certain criteria to qualify for this claim such as the custody and living arrangements, any child support involved, is the child claimed by another parent, ect.  More details can be found on CRA website entitled "Can You Claim the Amount for an Eligible Dependent?" and What are the situation in which you cannot claim the amount for an eligible dependent?

These are just a few of the commonly missed deductions. If you are preparing your own return this year, please review to make sure you have not overlooked some valuable deductions. Best of luck with this years taxes and please remember we are only a phone call away. 

Gerard is an experienced accountant located in Rothesay, just outside Saint John, NB. He established CG Jones CGA in 2011 to offer expert services in Tax, Finance, Project Management and Consulting. His intention is to provide these expert services, usually affordable only to large corporations, to small and medium businesses as well as Professionals and business owners at rates more in line to what this group can manage. Gerard is just a call or email away if you would like to discuss ways your firm can look at tax savings, finance options, or project management needs. He can be reached at (506) 849-3366 or by email.

Gerard Jones, CGA

Principal, CG Jones CGA

(506) 849-3366

cgj@jonescga.com

www.jonescga.com

Tax Tweet # 3: Ensure only one Person is Claiming the Child

One main criteria of Tax Tweet #1 and #2 is that only one parent can claim the tax credit for the child. If you are separated and have only one child together, this could be difficult as both parents may want to claim the tax credit. In this case, CRA will revert to the court ordered divorce or separation agreement to see if it is stipulated in the agreement. If a determination is not provided for in the agreement, and the parties cannot agree on who claims the child, then CRA has ruled that neither party can use the deduction. It would be a shame if this was to happen so please ensure you and your ex-spouse discuss this and come to an agreement. 

Tax Tweet #2: Children born after 1994 (for Tax Year 2011)

Parents of children born after 1994 receive a federal tax credit of $2131 in the tax year 2011. This results in a federal tax reduction of $320. Although your children may not live with you full time, you may still be eligible to receive this federal tax credit, assuming no one else is claiming it for the child.

Tax Tweet #1: Amount for Eligible Dependent

Tax Tweet #1: Amount for Eligible Dependent

For some situations, separated or divorced parents who have not lived common law over the previous tax year may be eligible to claim the amount for an eligible dependent. This claim can be huge. In 2011, the non-refundable tax credit was $10, 527 which would result in a reduction of federal tax payable of $1579 as well as an additional provincial tax credit, depending on your province or territory. In New Brunswick the provincial tax credit is about $958 for a combined tax reduction of $2537. 

There are certain criteria to qualify for this claim such as the custody and living arrangements, any child support involved, is the child claimed by another parent, ect. So please consult a tax professional to find out if you are eligible for this credit. More details can be found on CRA website entitled “Can You Claim the Amount for An Eligible Dependent?” and What are the situations in which you cannot claim the amount for an eligible dependant?