Completing your tax return is really a tax reconciliation. You have taxes withheld on your employment income, pension income, RRSP withdrawals and RRIF and annuity payments. Most individuals with one T4 (employment income) without any other deductions or credits normally have the right of amount of tax withheld and the reconciliation ends with a small refund or small amount owing.
The reason you have a large tax refund is because of credits claimed (children, spouse, medical, donations, tuition) or deductions made (RRSP, child care expenses, union dues, spousal support payments made).
Why do you have taxes owing? Often because of more than one T4 (many employers) or many sources of income with no or little tax withheld (pension, CPP, OAS, retirement income fund withdrawals, spousal support income, employment insurance income).
There are two kinds of tax credits: non-refundable and refundable.
What’s the difference?
Non-Refundable Tax Credits are the most popular ones: medical, spousal amount, disability, donations, fitness (remember the new Manitoba Fitness Credit for young people age 16 to 24; annual costs of up to $500 are claimable; save up to $54).
Non-Refundable Tax Credits reduce your taxes payable down to zero, but do not give you any more than that. I sometimes have to disappoint mostly seniors that have lots of medical expenses incurred, but I cannot use them on their tax returns because they have no federal or provincial taxes payable.
There are only a few refundable tax credits that will actually give you money back even if you have no taxes payable. There is the Working Income Tax Benefit for individuals with low employment income and based on family situations (spouse with low income, and other dependents).
There is also the Refundable Medical Expense Supplement: also for low employment income filers with high medical expenses. I have sometimes suggested to those with high medical expenses to get a part time job, or create self employment income (at least $3200) so they can get this refundable credit (up to $1089).
The Province of Manitoba since 2009 has offered the Manitoba Primary Caregiver Tax Credit. This has been a popular one with many of my clients qualifying if they provide care for another person. Generally if the person requiring care is using home care or would have if they didn’t receive care in the community, the caregiver gets a refundable credit up to $1275 per year. This is a financial recognition by the provincial government that you are saving them money by caring for a parent, sibling, child or neighbour. You are reducing their homecare expenses!
The Manitoba Tuition Fee Income Tax Rebate has been available to anyone who graduated (inside or outside Manitoba) after December 2006 and has Manitoba taxes payable. Generally you will be able to claim up to 60% of your tuition paid. This rebate was created to encourage students graduating to stay and work in Manitoba.
All these credits and rebates are why many of my clients have sought my professional tax service and have referred others. Too often your taxes are getting completed by other tax preparers or “family or friends” that don’t know about these credits or don’t ask you about them.
Every year I get dozens of new clients and when I review their past tax returns, I often find something that was missed and I get them back some money from past tax returns.
As an example, getting the Disability Tax Credit and having taxes adjusted up to ten years back often puts lots of money in people’s pockets! I’m happy to help people get tax refunds they deserve!
Sometimes I’m helping them apply for the Guaranteed Income Supplement to provide additional income. One recent couple received retroactive pay of over $8000!
I’m in the business of asking questions. I’m a financial advisor. I’m trained to ask questions! I want to make sure you are paying the least taxes possible or getting the biggest refund possible.
Remember the 2011 tax deadline for those who owe is April 30. For the self employed the deadline is June 15. If you are getting a refund, you have three years to file! But most people expecting a refund are the first ones in my office in February and March.
Anni Markmann is a financial advisor and tax professional working, living, and volunteering in our community. Contact her at 422-6631 or email@example.com or the new location at 36 Dawson Road in Ste Anne