I enjoy the challenges of finding tax savings for my clients. When I meet new clients each year, I look forward to reviewing their past taxes looking for missed tax savings, or letting them know about ways to save taxes in the future.
You may think you are “saving” money by having a non-professional filing your taxes (and that could include yourself), you might be missing out!
I recently had a woman make an appointment to have her and her husband’s taxes completed. She always files them herself: they are pretty straight forward: some employment tax slips, some RRSP contributions; that’s about it. I was ready to tell her she could have filed them herself and then I spotted something: some un-deducted RRSP contributions: $1300. I pointed them out to her and she admitted she never would have known about them. So I found about $500 tax savings for her. I told her she could continue to file her own taxes and maybe come and see me every four to five years to make sure we weren’t missing anything.
Another new client, a young man, attended trade school and worked part of the year. I was reviewing his T4 from his employer and noted he seemed to have a very high amount in box 40 – taxable benefits. I inquired and he explained a bit about what he does. I said that the taxable benefit seems very high. We talked some more, he called his employer who referred the query to the company accountant. I spoke to the accountant the next morning and we determined the “taxable benefit” was for an entire year, not for the six months he actually worked there. I found him about $3,000 in tax savings.
Another new client: mother of one of my clients. I saw her Notice of Assessment from 2010 and although it was all in French, I could determine that she had some Manitoba taxes payable. Seemed odd to me based on her zero taxes payable for 2011. Can I get a copy of her 2010 taxes? She had some unused charitable donations that could have reduced her taxes. Found her $180! There may be more when I get to look at the last 10 years! (We can adjust taxes back 10 years!)
Another new couple: I’m filing their taxes and asked some questions. Can I get your taxes going back to 2007 when the Pension Income Splitting came in to effect? Wow, found about $1500 from 2007 to 2010! Just from moving $2000 pension income from one spouse to the other (she is still working and they had been filing their taxes separately).
The most often missed tax savings is medical expenses.
New clients often comment that their previous tax preparer (father, mother, cousin, brother-in-law, another tax company or accountant) never asked them these questions: any travel into Winnipeg for special medical appointments? Are you paying for some or all of your health care premiums through work? When you travelled last year did you pay for travel health insurance? Why were you off work? Would it qualify for the disability tax credit? I see you have no employment income, but lots of medical expenses; would you be able to have a part time job and earn $3200 for the year and claim the medical expense tax rebate?
Your child graduated? Congratulations! They may be able to claim the Manitoba Tuition Tax Rebate! Most tax returns for repeat customers I do a comparison to the previous year to see what we may be missing. It helps reduce some surprises from a notice of reassessment.
I think you now understand I ask lots of questions; especially new clients.
You walk in with a limp or a cane; you just recently had or will soon have hip or knee replacement surgery or I see you are receiving disability income. I give you the disability tax credit form. Most of the doctors in Ste Anne are used to my cover letter asking them to complete the disability tax credit for my client, their patient.
Are you receiving disability income that is taxable? Did you pay for some of the premiums yourself? We can claim that as a deduction. (This is one of the most unknown deductions available). A year ago one of my new clients fortunately had all her pay stubs for the past 15+ years. We found lots of money for her by deducting the disability premiums she had paid since starting almost 20 years ago.
And I also recommend saving taxes in the future. I see you have a T5 from your savings account… do you have up to $20,000 now in the Tax Free Savings Account? I see your spouse is 65+ and you are under 65, we should reduce your income if we can and maximize the Guaranteed Income Supplement. How much do you have left in your Registered Retirement Income Fund (RRIF)? Maybe we should get more of it out now before you turn 65 and become eligible for: Guaranteed Income Supplement or full Age Amount Credit or full Old Age Security.
Oh, that’s it for your RRIF? You have no more to withdraw? Then let’s use all your charitable donations in 2011 to reduce your Manitoba taxes payable now since you won’t have as much income next year.
We cannot seem to use your medical expenses this year (needs to exceed 3% of your net income). Oh, you had large medical expenses last fall and January and February this year? Let’s save them for 2012: we can use any 12 month period so we can maximize your medical expenses.
So don’t just get your taxes done: Get them done right!
If you have already had your taxes filed; no worries: we can always do some adjustments to get some tax savings!
Remember: the deadline if you owe some taxes is April 30. If you are self-employed, the deadline is June 15. If you are expecting a refund, you have three years to file!
If you owe but cannot pay, make sure you file on time to avoid the high penalties. Make arrangements with Canada Revenue Agency to get it paid in a reasonable time.
Anni Markmann is a professional tax preparer and financial advisor working, living, and volunteering in our community. Contact her at 422-6631 or firstname.lastname@example.org or at her new location at 36 Dawson Road in Ste Anne.