Monthly Archives: August 2013

Back to school tax credits

As the leaves start to fall and students start to dread the approaching school year, life gets inescapably busy. The summer always seems to fly by and when September hits, parents of post-secondary students find themselves frantically moving their kids into dorms and shelling out cash for textbooks. With all of this chaos, many people forget to keep track of some important receipts and come tax time, they lose out on some great school tax credits and tax deductions.

Tuition Tax Credit

Post-secondary students can claim their tuition fees to receive a tuition tax credit and need either an official tax receipt or a completed form T2202A to do so. This tax credit is fairly straightforward and is commonly transferred to a student’s parents if their income isn’t very high or if the parents are the ones footing the educational bill.

Note: If there are any student loans involved, you might want to become familiar with the rules for claiming interest paid on student loans for after the schooling is finished.

Licensing or Examination Fees

Paying to take an exam or to receive a license in order to practice a certain profession or trade in Canada might be eligible for the tuition tax credit as well. There are some exceptions if you are being reimbursed by an employer, so make sure to check with your accountant before you file your tax return.

Deducting Student Moving Expenses

If a student has to move in order to go to school (at least 40 km closer than their previous home), they can claim their moving expenses. Unfortunately, claiming moving expenses for school isn’t exactly as helpful as it is for work. A student can only deduct their moving expenses from the money they receive as a result of attending school and would have to claim as income.

In other words, if a student receives a bursary or a research grant and has to move to another location to complete their educational commitment, they can deduct their moving expenses from that income.

Textbooks

Even though textbooks range in price dramatically from faculty to faculty, the CRA handles textbook tax deductions in a one-size-fits-all approach. You can claim $65 per month for full-time studies and $20 for part-time. Your accountant will use your Schedule 11 to figure out exactly how much you can claim.

Make sure to keep all of these school tax credits and deductions in mind as the weather cools and the semester starts up. You will reap the benefits at tax time!

If you have any questions, please feel free to contact us. We are tax specialists and would be happy to meet with you.

inheritance

Tax problems with your inheritance

When someone passes away, it’s unfortunately common for their estate to include some messy tax problems. Unless the individual or their family is on the ball and has been taking proper care of their taxes, they might be leaving behind quite a headache.

What kinds of tax problems occur with the deceased?

There are a few common scenarios where family members are left to deal with tax chaos after their loved one has passed away. Most of the time, the issue is a result of a lack of tax knowledge and can be completely avoided. Some of these tax problems exist due to:

  1. Unpaid taxes – If someone has experienced a long illness before their death, they may have been neglecting their taxes for multiple years. The estate’s executor will be responsible for completing the required forms and making sure that the deceased’s taxes are up-to-date.
  2. Inheritance or estate taxes – You might be surprised by what parts of an inheritance are taxable for the recipient. Because there are different laws for different forms of an inheritance (eg. life insurance beneficiary vs. property), what the deceased intended as fair might end up being quite unequal.
  3. Hidden funds or assets – While it sounds like a pleasant surprise to discover that a relative had an overseas bank account you didn’t know about, you might be less than enthused to learn that they had also been neglecting to share that information with the IRS or CRA and they owe taxes on that money.

Make inheritance preparations now

No one enjoys talking with loved ones about a time when they are no longer around, but making sure that their (and your) taxes are in order can make a considerable difference in the future.

The first step is to ensure that you and your loved ones have an accountant you trust to help you navigate your current tax situation. Your accountant should also know about your plans in case of death. He/she will be able to give you information about the taxes your loved ones will have to pay on their inheritance and will help you to understand exactly what you’re leaving behind.

The Chicago Tribune recently posted about potential tax problems with an inheritance and looked to Douglas Rothermich, vice president of wealth planning strategies at TIIAA-CRF for his perspective. “Most families don’t want to let assets blow up their kids financially or create a wedge within the family,” he said. “It’s really important that older people planning their affairs think it through ahead of time so their loved ones don’t inherit a tax mess.”

If you would like to talk about the tax situation of an inheritance you have received or to plan in case of your own death, please contact us. We would be happy to help.

bookkeeping

Do I really need a bookkeeper?

At AP Tax, we offer accounting services, like preparing tax returns, but we also provide bookkeeping in Toronto. One of the questions we are regularly asked is whether or not a business needs an accountant or a bookkeeper (most likely, both).

We think that the main reason that we’re asked this question is that the definition of these two roles is a little blurry. Why hire a bookkeeper when you already have an accountant?

Big Picture vs. Daily Life

The main difference between an accountant and a bookkeeper is that an accountant looks at the big picture of your business and can advise you on financial strategy, especially when it comes to tax time. A bookkeeper is involved in the day-to-day activities of your business and keeps track of your income and expenses. They might even manage your payroll and take care of your accounts receivable and accounts payable. In other words, a bookkeeper follows through with the strategy your accountant creates.

When should I hire a bookkeeper?

The answer to this question really depends on you, the business owner. Some people hire a bookkeeper as soon as they start a business because they know that they want to have accurate and tidy books right from the beginning. Others do their own until they get too big to do manage.

Because bookkeepers can usually be hired for as many hours as you need them on a weekly or monthly basis, you can have quite a bit of control over how much of an expense they will be.

5 Reasons You Might Want a Bookkeeper

  1. You don’t trust yourself to do it. A lot of business owners acknowledge that they might not have the knowledge they need to manage their bookkeeping properly.
  2. You don’t have the time. If you’re spending time sorting through receipts and chasing payment, you aren’t really working at your business.
  3. You would like to be organized. Professional bookkeepers have well-refined systems so that when something comes up, like a broken piece of equipment, they are able to find the information you need to respond immediately and avoid your business coming to a grinding halt.
  4. You could use the information to grow. Having up-to-date records allows you to analyze trends in your business and identify ways to strategically grow.
  5. You think that you could save more money. It’s extremely common for a bookkeeper to save a business more money than they cost the business to keep around. One of the fastest ways to lose money is by not knowing where it is going!

Out of all of these reasons you might want to hire a bookkeeper, accuracy is probably the one you should be looking at first. Incorrect books could be affecting the tax that you’ll pay and will definitely jack up your accounting bill at tax time.

Contact us if you would like to meet one of our bookkeepers and hear more about how they can put your books in order.