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Tax Related News by Eggett Tax Services

NEW TAX CREDITS FOR 2014 – WHAT DO THEY MEAN FOR YOU?*

2014 was a landmark year for enhanced family and child related tax benefits. We are committed to helping you get the most from these government announced initiatives. Here’s what’s proposed:

UNIVERSAL CHILD CARE BENEFIT

  • As of January 1st, 2015 the UCCB would increase to $1,920 per year for each child under the age of 6 ($160/mth from $100/mth)
  • The UCCB would also expand with a new benefit of $720 per year for each child aged 7-17 ($60/mth from $0/mth)
  • CRA will issue a ‘catch-up payment’ for amounts payable from January through June in July 2015. This means:
    • for children under 6, you could receive $60/mth from January to June, for a total of $520 in July, and $160/mth starting in August
    • for children between 6-17, you could receive a total of $420 in July and $60/mth starting in August
  • This credit is available to all families, regardless of income, and is in addition to the Child Tax Benefit (CTB) program

FAMILY TAX CUT

  • This new tax credit (often referred to as income splitting) is worth up to $2,000 in tax savings for families with children under age 18
  • It allows one spouse to transfer up to $50,000 of taxable income, in effect to a spouse in a lower income tax bracket
  • Both spouses must complete their returns at the same time to be eligible for the calculation of total income and the family tax credit
  • This credit won’t provide any relief for single parent families

CHILD FITNESS TAX CREDIT

  • The maximum eligible amount has doubled to $1,000
  • Effective for 2015, becomes a refundable credit
  • Can be claimed for children under 16 at the beginning of the year, or under age 18 for children with a disability

CHILD CARE EXPENSES

  • Increases apply for child care expenses in 2015 and forward:
    • Up to $8,000 per year per child under age 7
    • Up to $5,000 per year per child aged 7 to16
    • Up to $11,000 per year for children with a disability

SEARCH & RESCUE VOLUNTEERS TAX CREDIT

  • This is a new non-refundable tax credit of $3,000 for volunteers who perform 200 hours or more of eligible services with search & rescue organizations or fire departments
  • Hours of service since Jan 1st, 2014 qualify for the credit; a written certificate of hours if required to claim the credit
  • If eligible, you may claim either the volunteer firefighter credit or this credit, but not both

ONTARIO FOOD PROGRAM DONATION TAX CREDIT

  • This is a new Ontario non-refundable tax credit for agriculture products grown and donated to an eligible community food programme as of January 1st, 2014
  • Available to farmers, their spouses and to corporations who carry on a business of farming in Ontario, the credit is worth 25% of the Fair Market Value (FMV) of the product donated

 

GST / HST CREDIT

  • Effective with the 2014 tax return, CRA will automatically determine eligibility for this credit and a Notice of Determination will be sent to individuals who qualify – making the application is no longer required
  • Designation of the recipient for the GST will be determined by CRA where either spouse/partner is eligible for the credit. A specific recipient can no longer be requested

 

*New Tax Credits proposed were announced in the 2014 federal budget, but will not become law until they have received Royal Assent through parliament. We will communicate updates and changes through our website as available. Check back often for what’s new!

CASH … a risky tax plan!

Generally accepted practices for all cash transactions demands that the payee should always receive a receipt at the time of accepting a cash payment. Many businesses will give a small discount for cash payments as certain transaction fees are avoided.

If you are ever offered a reduced price for cash without a receipt think twice! Usually this means that the person asking for an “unreceipted” cash transaction will not be reporting the sale as income to Canada Revenue Agency.

This behaviour promotes the impression that the sales person or worker is less than honest. This should naturally reduce your confidence in both the person and the service being provided. Cash transactions may reduce your immediate costs but even greater expenses may be incurred by your acceptance. The reduction of the HST you would have paid and the taxes not paid by the business will inevitably increase your personal tax burden when you consider the thousands of people who are members of this underground economy.

Consumers who are avoiding the immediate tax owing can later find out that as there is no proof of the transaction the product or service you have paid for has no warranty. You may have no recourse in case of poor workmanship. As the work may be sub-standard you may also incur a further risk of liability in case of injury on your property.

Business owners who contract products or services for cash, and there is no receipt, cannot deduct the expense. CRA demands that you provide documentation for all expenses deducted on your business statement.

All transactions involving cash should be immediately receipted. This is equally as important when paying for rent, child care services, auto and house repairs.

What To Do Now for 2014

When you think about saving on taxes, think “RAP“:

REVIEW

  • Review your 2013 Notice of Assessment and take notice of any carry forward amounts particularly for tuition, undeducted RRSP contributions and capital losses. We can help you plan for tax savings based on these amounts.

ANALYZE

  • If your return was reassessed or adjusted by CRA (Revenue Canada) always investigate the changes. CRA does not always have all the information when they assess a situation. You should ask your tax consultant about any changes immediately. If you prepared your return we will review and explain the change for you. There is no fee to you unless we can improve the tax return for you.
  • Evaluate RESP’s and Tax-Free Savings Accounts (TFSA) to ensure they are the best vehicles for your particular tax situation. RESP and TFSA’s are not necessarily the most beneficial for all tax payers.
  • If you have had a major change in any part of your life including marital status, new job, severance or retirement don’t delay in preparing for tax related consequences. We are always available to meet with you to assess and consider your tax reporting requirements.

PLAN

  • Now is the time to plan your RRSP contributions for this tax year. It is never too late to start monthly contributions automatically from your bank account relieving the burden of making a lump sum payment later in the year. We can advise on the amount to optimize your tax savings.
  • If you found the amount you paid at the end of the year difficult to pay now is the time to adjust amounts deducted from your various income sources.
  • If you have capital losses carried forward it may be to your advantage to trigger a capital gain equal to the loss.
  • Be sure to keep all the proper receipts required for charitable donations, medical expenses, summer camps, physical and artistic activities for children under age 16 (disabled children under 18). It is easier to go back now and get these receipts pulled together rather than delaying your refund waiting for slips or requesting duplicates in 2015.

Tax planning should occur now. You cannot do anything about your 2014 taxes after December 31, 2014, other than making RRSP contributions until March 2, 2015. We offer tax planning consultations to review, analyze and plan for your family’s tax structure to maximize your tax savings.