Archive for January, 2014

You are currently browsing the Evelyn Jacks Blog blog archives for January, 2014.

Non-Resident Pilots and Overseas Workers See Tax Hikes in 2013

When it comes to tax time, it always pays to do a good review of the tax changes from one year to the next and find those “dark horses”; the little-known tax facts that can make a big difference on tax filing outcomes.

One such change exists for pilots flying in and out of Canada, another for overseas workers and yet a third for those whose employers pay premiums for wage loss replacement plans.

Pilots. Non-resident pilots flying in and out of Canada may  have to report their earnings on the Canadian tax return for the first time in 2013. All of the income attributable to the flight is reportable if the flight departs from a location in Canada and arrives in a location in Canada. One half of the income is attributable if the flight departs from a location outside Canada and arrives here or leaves from Canada but lands outside Canada. No reporting is required if the flight departs and arrives in a location outside Canada.

Overseas Workers. Canadian residents, meanwhile, who performed services outside Canada for more than six consecutive months beginning or ending in the tax year, for either a Canadian employer or a Canadian owned foreign affiliate, may be able to claim the Overseas Employment Tax Credit, using Form T626. Qualifying income must be in exploration for natural resources, construction, installation, agricultural or engineering activities. The amount to be sheltered, however has changed in 2013 – it’s 60% of income up to $60,000. In past years this was 80% of income up to $80,000 a year. The credit will be end by 2016.

Group Sickness Plans. There is a new line on the T1 tax return – line 103 – intended for wage loss replacement plan contributions made by the employee. This is not added to income; but serves as a notation line for CRA. Be sure, though, to reduce any wage loss replacement plan income reported on your T4 slip by contributions you made and have not previously deducted.

Employer contributions to group accident/sickness plans will show up as a taxable benefit on your 2013 T4 slip for the first time. This will not occur if the employer contributions will result in a wage-loss replacement benefit payable on a periodic basis; such premiums will continue to be non-taxable.

It’s Your Money. Your Life. There are many tax rules that are specific to employed taxpayers. Be sure to come up to speed on income sources that may have changed their tax status, new indexed credits like the Canada Employment Credit ($1,117 in 2013), behind-the-scene changes to the tax laws, and the lucrative deductions available if you qualify to make a claim on Form T777 Employment Expenses. A certified tax professional who has taken a recent tax update course is well equipped to cover the nuances with you now, before the busy tax season begins.

Evelyn Jacks is president of Knowledge Bureau and author of 51 books on tax and personal wealth management. Her newest book Jacks on Tax: 2014 Edition is now available. She is also the founder and director of the Distinguished Advisor Conference (DAC). The theme of the 2014 three day think tank in Horseshoe Bay, Texas Nov 9-12 will be “Think BIG: Find the Sweet Spots in Wealth Management”  Follow Evelyn on Twitter at @EvelynJacks.


Claiming Employment Expenses

Do you spend money in the course of your work that’s not reimbursed by your employer? Certain employees may, in fact, claim out-of-pocket expenses on their tax returns.

However, the Income Tax Act is very specific about the expenses that may be claimed.

The deduction for these costs will ultimately show up on Line 229 of the T1. It’s a good idea to use Form T777 Statement of Employment Expenses as a guide to the receipts you need to look for. You’ll also need to have Form T2200 Declaration of Conditions of Employment signed by your employer.

Employees may claim certain specific expenses of employment, depending on whether the employer will verify this was a necessary condition of employment. This includes travel costs, the cost of using an auto to earn income, supplies used up in the course of employment, the cost of an assistant, and home office costs. Home office costs cannot create or increase a loss, but may be carried forward for use in a future year.

Commissioned sales people can claim more expense categories—sales and promotion expenses for example—because they are expected to foster relationships with clients in their negotiation of contracts for their employers. However, claims are limited to commissions earned. No commissions this year? Make a claim for travelling expenses only.

Form Filing Tip:  Form T2200, Declaration of Conditions of Employment, signed by the employer, is required for each year in which tax-deductible expenses are claimed. This form must be kept on file for CRA to review.

It’s Your Money. Your Life. Claim all the expenses you are entitled to as a deduction. . .then invest your bonus in a TFSA or RRSP. It’s a good way to leverage your good tax fortune!

Evelyn Jacks is president of Knowledge Bureau and author of 51 books on tax and personal wealth management. Her newest book Jacks on Tax: 2014 Edition is now available. She is also the founder and director of the Distinguished Advisor Conference (DAC). The theme of the 2014 three day think tank in Horseshoe Bay, Texas Nov 9-12 will be “Think BIG: Find the Sweet Spots in Wealth Management”  Follow Evelyn on Twitter at @EvelynJacks.


Gathering Documents a Pain, But It Sure Pays Off!

I was so glad to hear from Russ, in response to last week’s blog. He shared that he had read my book; realized he missed claiming moving expenses and then adjusted his prior filed returns. To his delight, he received a $6600 refund – found money!  Good for you Russ!

This is just one real-life example of the thousands of dollars average taxpayers can miss because they just don’t know about all their tax deductions.

Moving expenses are particularly lucrative, because they include big ticket items like real estate commissions, removal expenses, legal fees to purchase your new home, but only if you had owned a home in the old location. Also eligible are the costs of transportation to the new work or business location and even the costs of staying up to 15 days in temporary living accommodations, like a hotel, for instance, while waiting for the new home to become available.

You must move at least 40 kilometers closer to the new work or business location, so if you are retiring to the west coast, for example, you won’t be able to claim these costs against pension or investment income. You must have actively earned income at the new location.

In the case of students, moving expenses can be claimed if you are studying full time at the new location, but only against taxable scholarships, bursaries or other prizes or income from employment or self-employment.

Moving expenses cannot be carried back, but they can be carried forward, and in the case of spouses, can be claimed on either return.

It’s Your Money. Your Life. It can be extremely profitable to become more interested in your personal tax affairs, as Russ found out. Even if you don’t intend to file your own tax return, the more you know, the better prepared you’ll be to gather the right information for your tax professional and ask better questions, too. So don’t be afraid to pick up your copy of Jacks on Tax or drop in now to review documentation requirements for 2013 with your tax accountant if you are not sure. Now is good time ;).

Evelyn Jacks is president of Knowledge Bureau and author of 51 books on tax and personal wealth management. Her newest book Jacks on Tax: 2014 Edition is now available. She is also the founder and director of the Distinguished Advisor Conference (DAC). The theme of the 2014 three day think tank in Horseshoe Bay, Texas Nov 9-12 will be “Think BIG: Find the Sweet Spots in Wealth Management”  Follow Evelyn on Twitter at @EvelynJacks.


Six Ways to Get Ready for Tax Filing

Happy New Year!  If you want to get a “jump start” on your financial fitness this year, get busy and use the current cold snap to sort tax receipts and speed up your tax refund.

Electronic filing will help a lot, so changing your game by researching the right tax software for your family can be a smart move, especially because the wait time for any help you might seek from CRA can hold up your game.

According to the CRA website, they expect to process paper returns in four to six weeks, but won’t start to do so until mid-February. On the other hand, tax refunds will be processed within 8 business days if your professional uses EFILING or you NETFILE on your own. Acceptance of transmissions will start on February 10, based on a call to CRA today. Unfortunately their website won’t update until after January 17 – the deadline date for NETFILING 2012 returns.

Also, note that CRA doesn’t want to take your “where’s my refund” phone calls before mid-March, even if you file your return in January. If you file on or before April 15, they recommend you wait four weeks before you call; after April 15, wait six weeks before you call.

So, with these service levels, filing a more accurate tax return therefore counts and that’s why taking time now to make sure you claim all the tax deductions and credits you are entitled is important. I will be dedicating this blog to helping you with that.  Today, here are my top six tax filing pre-requisites:

  1. Diarize tax filing milestones. You can find a list in Knowledge Bureau Report – a free weekly financial news publication from Canada’s national financial educator. For example, most people will need to file tax returns by April 30; June 15 if you are self-employed but unincorporated. There are several new forms requiring your attention if you have foreign income or property, or participate in “reportable transactions”, for the purposes of tax avoidance.
  1. Get the tax documents together. Plan to do family returns together, so notify all family members to gather their documents, keeping T-slips together as they trickle in over the next several weeks and sorting discretionary amounts – child care, moving expenses, property, investment and business expenses, carrying costs, public transit costs, tuition fees, children’s arts and fitness costs, medical expenses, charitable donations, and so on, immediately.
  1. Do a 2013 life events checklist. What changed in your personal, financial, and career life in 2013? Was there a birth or death, marriage or divorce, new job or severance package? These life events will likely have tax implications, so that’s the place to start in asking tax questions of your professional advisor or in researching tax news in the forms or your software.
  1. Print the T1 tax return and schedules from the CRA website. These make great guidelines for sorting receipts. Also find statements for reporting rental income, investment income, business income and new asset purchases or dispositions.
  1. Find out what’s new in tax. Every year there are numerous changes to tax law. This year, make sure you understand the rules for claiming disability amounts, amounts for infirm dependants you are taking care of, and clawback zones for receiving Employment Insurance, Old Age Security, or refundable tax credits.
  1. Get Educated. If you want a great classroom experience, join us at the Personal Tax Bootcamps in Winnipeg January 17, Toronto January 20, Calgary January 21, and Vancouver January 22. You can also earn your certificate online with basic, intermediate, and advanced tax courses from Knowledge Bureau or read my new book, Jacks on Tax: Your Do-It-Yourself Guide to Filing Taxes Online.       

It’s Your Money. Your Life. Over the past several years, average tax refunds have well exceeded $1600. When you make it your business to reclaim that money sooner, you’re taking the first step to financial fitness in 2014. Putting your tax refund towards debt or savings in a TFSA or RRSP will propel your financial fitness forward. It’s just smart to make tax filing savvy a big part of your self-improvement plans this year.

Evelyn Jacks is president of Knowledge Bureau and author of 51 books on tax and personal wealth management. Her newest book Jacks on Tax: 2014 Edition is now available. She is also the founder and director of the Distinguished Advisor Conference (DAC). The theme of the 2014 three day think tank in Horseshoe Bay, Texas Nov 9-12 will be “Think BIG: Find the Sweet Spots in Wealth Management”  Follow Evelyn on Twitter at @EvelynJacks.