For the 2014 tax year, TurboTax has unveiled major improvements to the user interface and navigation of our desktop product that give you more control to prepare your taxes with ease and confidence.
The improvements let you know exactly where you are in your return, enabling you to see the progress you have made so far on your return, and how far is left to go.
Forgot to enter something or need to go to a previous section? Our new left-side menu makes it easy by showing the sections of your return along with slips and deductions associated with each section at a glance. This allows you to get anywhere you need to go within 2-3 three clicks, saving you time.
We’ve moved our help options to a consolidated top menu, with four easy options:
With the new Adjust Contrast option you can customize the screen to your viewing needs by choosing your font size and adjusting the level of contrast between the background and the font.
Investment income and expenses now easier to claim
Not sure how to claim bank interest, dividends, rental property and capital gains/losses? Our Standard, Premier and Home and Business versions now include improved investment profiling to simplify claiming your slip-based investment income and expenses. If you have non-slip based investments or expenses, our new ‘Guide Me’ feature available in the Premier version ensures you know what you have and how to enter it into TurboTax correctly.
What hasn’t changed
As always, TurboTax is tailored just for you. We get to know you and give you a customized experience that guides you through the story of your year. You only need to answer simple questions that relate to your unique situation and we’ll search though more than 400 deductions and credits to find those that apply to you based on your unique situation, so you can be confident you won’t miss a thing.
And when you use TurboTax year after year, it gets even easier. As a returning customer, we will automatically transfer last year’s data to help ensure accuracy and save you time.
If you’ve got questions, we’re here for you
It’s DIY, not do it alone. If ever you have questions about TurboTax, we offer several support options to help you. Through our online support site you can access product videos and FAQs, or talk to our product experts by phone or online chat. On the Live Community TurboTax employees and customers discuss the ins-and-outs of the product, and taxes.
TurboTax’s Live Tax Advice gives unlimited phone or chat access to tax experts who can talk you through your tax questions and give you personalized tax guidance. With Pro Review, you get the extra insurance of having a tax pro check your return for any money-costing errors or money-saving opportunities. And as even 100% accurate returns may get audited, Audit Defense saves you time and money.
By Jennifer Gorman, TurboTax
With the holiday season upon us, the last thing you likely want to think about is your tax return. But by adding a few items to your to-do list now, you may see extra dollars in your pocket in the spring. Many of the credits you can claim on your taxes have a cutoff period of December 31st so a bit of planning could lead to a bigger refund in 2015. Here are some things you can do before January 1st to maximize your savings at tax time.
Medical expenses for yourself, your spouse and any other dependants can add up to a sizable credit on your taxes. Fill any prescriptions you may have before the end of the year. If you are due for an eye exam, have it this month. Don’t wait until the new year to buy your glasses or contact lenses. Get them now and claim the expense. Don’t forget that dental costs are also tax deductible. Have that cleaning or cavity filled in December.
Donations to charities are a great idea at any time of the year. To claim these deductions on your 2014 return, give your gifts now. If you are a first time donor, you may also qualify for an extra credit if you donate cash to a qualified charity. Remember to obtain a proper receipt for your donation.
Owners of small businesses can also maximize deductions by making purchases in the calendar year. Take advantage of Boxing Day sales to purchase that new office furniture you’ve had your eye on. If you’re planning on upgrading your office computer, do it now to claim the deduction. Simple steps such as purchasing office supplies like printer ink or stamps for the year can lead to savings at tax time. If you use oil to heat your office space or home office, filling the tank now is another good idea. All of these steps add up to a bigger deduction for your 2014 tax return.
If you own a rental property, consider making repairs sooner rather than later. Purchase painting or cleaning supplies for the upcoming year now to maximize your deductions. Also, take advantage of holiday sales to purchase new appliances for your units. That great deal on a new fridge or stove can also be a deduction for your 2014 return if you buy it before the end of the month. If your tenants have given their notice to end their lease, place your ad now. Advertising for soon-to-be vacant units before year-end gives you another claimable expense for 2014.
About Jennifer Gorman:
Jennifer is currently a manager with the TurboTax Live Tax Advice service. With over 20 years of tax preparation experience, she enjoys holding yearly seminars in her hometown in Newfoundland to teach seniors and students how to use TurboTax to prepare their own returns.
Use this checklist to determine which medical expenses you can take as a deduction on your income tax return.
If you have been paying a lot for health care recently, you may be glad to learn that many of those expenses could qualify as deductible from your taxable income on line 331 on Schedule 1 of the T1 General Return.
You have to itemize your medical deductions to claim these expenses. Here is a handy tax tip: most pharmacies can give you a printout summary of your prescriptions during the year; go see your pharmacy to get an itemized list of your expenses for the year.
And there’s another trick: medical expenses are only deductible to the extent that they exceed 3% of your Net Income (line 236 on your T1 General Return). If your Net Income is $50,000, for example, the first $1500 of qualified expenses (3% of $50,000) doesn’t count for deduction purposes.
For help in preparing your tax return 1) print out this page and 2) put a check mark next to each medical expense that you had during the year.
A partial list of qualified medical expenses is shown below. For the complete list, see CRA Resource of eligible medical expenses.
· Acoustic Coupler
· Air conditioner necessary for relief from allergies or other respiratory problems (less any increase in the value of your home resulting from installation of air conditioning)
· Artificial limbs
· Artificial teeth
· Birth control pills prescribed by a doctor
· Computer Peripherals, if designed to be used exclusively by a blind person in the operation of a computer (prescription required)
· Contact lenses, including equipment and materials for using contacts
· Cosmetic surgery, if it’s necessary to improve a deformity related to a congenital abnormality, accident or disease
· Doctor or physician expenses (this varies by province, please visit the CRA for details)
· Drug addiction treatment, including in-patient treatment, meals and lodging at a therapeutic center for drug addiction
· Elastic hosiery to treat blood circulation problems
· Eye surgery, such as Lasik or a similar procedure, when it is not for cosmetic purposes
· Furnace – amount paid for an electric or sealed combustion furnace to replace a furnace that is neither of these because of a person’s respiratory ailment or immune system disorder – prescription required.
· Guide dog or other animal used by a visually-impaired, hearing-impaired or otherwise physically disabled person
· Hospital care
· Household help for nursing care services only
· Insurance premiums for medical care coverage
· Laboratory fees
· Legal fees paid to authorize treatment for mental illness
· Lifetime care advance payments
· Lodging expenses while away from home to receive medical care in a hospital or medical facility
· Long-term care insurance and long-term care expenses (there are limitations to what you can deduct)
· Medical aids, including wheelchairs, hearing aids and batteries, eyeglasses, contact lenses, crutches, braces and guide dogs (and their care)
· Medicines and drugs
· Moving Expenses – reasonable moving expenses to move a person who has severe & prolonged mobility impairment to housing that is more accessible to the person (limit $2000)
· Nursing care
· Nursing home expenses, including the entire cost of medical care, plus meals and lodging if the main reason for being in the home is to obtain medical care
· Orthopedic shoes, boots, & inserts
· Oxygen and oxygen equipment
· Pre-natal & Post-Natal treatments paid to a medical practitioner or a public or licensed private hospital
· Rocking Bed for a person diagnosed with poliomyelitis
· School Expenses – for persons with an impairment in physical or mental functions - a medical practitioner must certify in writing that the equipment, facilities or personnel specially provided by that school are required because of the person’s physical or mental impairment.
· Sunglasses (prescription only)
· Teletypewriters (the cost and repair of special telephone equipment for a hearing-impaired person)
· Television (the cost of equipment used to display the audio part of a TV program for hearing-impaired persons, prescription required)
· Transplant of an organ (but not hair transplants)
· Transportation costs for obtaining medical care
· Whirlpool Bath Treatments – the amount paid to a medical practitioner only. A hot tub that is installed in your home, even if prescribed by a medical practitioner, is not eligible.
· Wig for a patient who has lost his or her hair due to a disease
There are many things you need to consider before you incorporate your business. However, the most important thing is to understand what the differences are between being self-employed and starting your own corporation – and what the tax implications are.
Corporations File Tax Returns
A corporation is its own entity and therefore must file a tax return. This means that you’ll need to file both a personal and corporation tax return. In general, it is true that corporations pay a lower tax rate than personal. However, this normally applies to corporations that are making quite a bit of money. Corporations don’t receive tax credits such as the basic personal amount, which means that all of the net income in a corporation is taxable.
Corporate tax returns should be filed within 3 months of the corporation’s year end. Unlike self-employed income, a corporation does not need to file based on the calendar year.
Payroll can be another major component of incorporating your business. A self-employed person doesn’t need to worry about how to pay themselves. Instead, they can use their business income as they please as it’s all taxable on their own personal tax return.
Once you incorporate your business, you need to decide whether you’re going to withdraw a salary or dividends. In any case, there will be an expense on the corporate side and become taxable on your personal tax return. There are benefits to both but you must decide which one is best for your business.
Another consideration regards your expenses. As a self-employed person, you may be using your home and vehicle to earn income. As a result, you’ve been claiming a portion of both on your self-employment business statement to reduce your net income and essentially save on your overall tax bill. Once you incorporate, you can no longer claim these things to reduce your income.
You can rent a portion of your home for your business if you are using it to earn income; the rent will become an expense on the corporate tax return. However, you need to claim the income on your personal tax return. For your own personal vehicle, the corporation can either reimburse your vehicle expenses or provide you with an allowance. You can expense some of the costs for business purposes, but you will need to claim the costs differently.
These are but a few key considerations for your business. Before you make your final decision to incorporate, ensure that you understand your current business and get informed on how it may change the financial outlook. We also recommend that you seek out the advice of a professional lawyer to discuss whether or not incorporating is the most beneficial from a liability standpoint.
The answer to the question of whether or not you can split your capital gain with your spouse depends on whether or not you shared in the purchase of the investment and how much your spouse contributed.
You can’t just split a capital gain 50/50 with your spouse.
This is because of the Attribution Rules, tax rules which have been especially created to limit income splitting (shifting income from a family member with a higher income to a family member with a lower income to reduce the overall tax a family has to pay).
Simply stated, the Attribution Rules say that when you transfer or loan property to your spouse (or to a trust in which your spouse has a beneficial interest), any income or loss from that property is deemed to be yours for a taxation year.
So when you transfer or loan a property to your spouse, the Attribution Rules attribute the income from the property back to the individual who may have transferred or loaned the property to split income – namely, you. And as the owner, you are the person accountable for any capital gain or loss on the sale of the property.
You can read the details about the Attribution Rules in the Canada Revenue Agency’s IT511R - Interspousal and Certain Other Transfers and Loans of Property.
The general rule, then, is that you declare your capital gain based on the proportion of your investment at the time you made the investment.
For example, if you bought 200 shares of stock and then sold them, realizing a capital gain, all of the capital gain would have to be declared on your income tax because you are the only person who paid for the stock.
If, on the other hand, you and your spouse bought 200 shares of stock, and you paid 75 percent of the purchase price while your spouse paid 25 percent of the purchase price, you would declare 75 percent of the capital gain on your income tax and your spouse would claim the other 25 percent.
Having a joint bank account doesn’t affect the rule in the slightest; the capital gain still has to be split depending on the original contribution of each spouse.
Splitting the income from a capital gain is possible, as long as you have the foresight to think ahead when you decide to purchase capital property such as stocks or real estate and arrange the split of the purchase price accordingly.
The Small Business Deduction is one of the most beneficial income tax deductions available to Canadian corporations because it reduces the amount of Part 1 tax that a corporation would have to pay otherwise.
For instance, according to the tax rates in effect as of January 1st, a corporation that qualifies for the Small Business Deduction would pay income tax at the rate of 4.5% in Ontario, while corporations of other types in the same province would pay tax at a rate of 11.5%.
This chart from the Canada Revenue Agency shows the lower and higher rates of corporate tax for each province or territory (except for Alberta and Quebec which do not have corporation tax collection agreements with the CRA).
However, a “Canadian corporation” doesn’t mean any corporation operating in Canada. To qualify for the Small Business Deduction, a corporation has to be a Canadian-controlled private corporation (CCPC).
To be classed as a Canadian-controlled private corporation, all of the following conditions have to be met according to Chapter 1 of the T4012 – T2 Corporation Income Tax Guide:
There is also a size limit based on a Canadian-controlled private corporation’s taxable capital.
CCPCs that have taxable capital employed in Canada of $15 million or more do not qualify for the Small Business Deduction.
CCPCs that have taxable capital of between $10 million and $15 million in the previous tax year are eligible for the Small Business Deduction but their business limit is reduced on a straight-line basis.
In addition, any CCPC that is a member of an associated group that has more than $10 million of taxable capital employed in Canada faces a reduced business limit as well.
Qualifying as a Canadian-controlled private corporation is the best possible income tax scenario for a Canadian corporation. The Small Business Deduction is just one of the income tax advantages such corporations can enjoy.
The Canada Revenue Agency does not encourage income splitting. In fact, they have specific policies against it, such as the Attribution Rules, meant to enforce the idea that whoever earns the income pays the tax on the income.
Simply stated, the Attribution Rules say that when you transfer or loan property to your spouse (or to a trust in which your spouse has a beneficial interest), any income or loss from that property is deemed to be yours for a taxation year – effectively preventing you from splitting your income with your spouse by giving them money.
(You can read the details about the Attribution Rules in the Canada Revenue Agency’s http://www.cra-arc.gc.ca/E/pub/tp/it511r/README.html IT511R – Interspousal and Certain Other Transfers and Loans of Property.)
However, one way you can split your income with your spouse is to loan them money to purchase property from you or to purchase an income producing investment such as stocks, bonds or mutual funds.
What You Have to Do to Use This Strategy Effectively
1) Make sure the loan is properly documented just like any other loan, and includes repayment terms.
2) Charge interest that’s at least equal to the Canada Revenue Agency’s prescribed rate. Currently this interest rate is one percent! This rate may be locked in until the loan is paid.
3) Make sure the lower-income spouse who receives the loan pays the interest that is due on the loan every year or within 30 days of the end of the year. A missed payment will cause the Attribution Rules to kick in and the income generated by the lent money to be attributed back to the higher-earning spouse who lent the money that year and in all future years.
How Spousal Loans Work Tax-Wise
For you to end up with a lower overall tax bill between the two of you, the money you lend your spouse has to make a return greater than the prescribed rate – and you have a really good chance of your investment doing this with a prescribed rate as low as it is.
And there is no requirement to pay back the principal, only the interest.
The lending spouse has to include the interest as income on his tax return but if the loan was used to purchase income-producing investments such as stocks, the spouse who received the loan will get to deduct the interest paid on theirs.
You May Have Business Income and Not Even Know It!
Well, any activity that you do for profit is business income, according to the Canada Revenue Agency.
So if you’ve sold a few items on eBay or Etsy or set up a table at your local outdoor market and sold things, you have been engaging in business and have business income that you must declare on your business income tax.
You see, it doesn’t matter that you haven’t made much money. The Canada Revenue Agency does not set any dollar value in its definition. So technically, you could make 25 cents and that would be business income.
It also doesn’t matter that you have not been “officially” operating a small business. You do not have to take any action at all other than engaging in an activity for profit to be considered to be in business.
You don’t have to have invoiced anyone or registered a business name or taken out a business license. In fact, in all Canadian provinces and territories, you are considered to be operating a sole proprietorship, doing business in your own name as an individual business owner, without even touching a form of any kind.
(Sole proprietorships that want to use any other name except the business owner’s legal name and all other forms of business in Canada, such as partnerships or corporations, do need to federally and/or provincially register their names; for more information, see the CRA’s website for more information.)
So the bad news is that you have to declare all your income on your income tax return, including your business income, even if the business income doesn’t amount to much or if you’re not actually “officially” running a business.
If you fail to report all your income, you may be subject to a penalty of 10% of the amount you failed to report after your first omission, and, “if you knowingly or under circumstances amounting to gross negligence participate in the making of a false statement or omission on your income tax return” (Canada Revenue Agency), the penalty is 50%of the tax attributable to the omission or false statement (with a minimum penalty of $100).
The good news is that having business income makes you eligible to claim business expenses. See our blog article on eligible business expenses so that you can save more on your taxes.
Guest Blogger Robin Taub is a financial literacy consultant, speaker and blogger and the best-selling author of A Parent’s Guide to Raising Money-Smart Kids. She holds a Bachelor of Commerce (with High Distinction) from the Rotman School of Management at the University of Toronto and earned her Chartered Accountant designation in 1989.Robin is also passionate about improving opportunities for women CPAs to advance into positions of leadership and is Chair of the Chartered Professional Accountants of Canada’s Women’s Leadership Council. She is an avid cyclist, snowboarder, music lover and concert goer and is the mother of two teenage children.
As we finally say goodbye to winter and welcome in spring, there is another short season most of us will encounter: tax season. This is the time of year when we’re busy gathering and organizing our tax information in anticipation of the April 30 filing deadline. I stay on top of my taxes throughout the year by filing my slips and receipts in a large accordion file as they come in. By the end of March, I’m ready! With tools like TurboTax, preparing and filing my return becomes a fairly quick and painless process.
But maybe your according folder looks more like a shoebox, with your receipts, T-slips and other documents in one big disorganized pile?! Then the first step is to spread out (take over the kitchen or dining room table) and start sorting and organizing your receipts.
Your kids may notice that you’re up to something, so why not use this as a teachable moment – an opportunity to talk to them about taxes. Although your kids are unlikely to be income taxpayers until they have their first real job, they’re not too young to understand the basic concept: you are taxed on the income you earn, and the more money you make, the more tax you pay! Explain that the reason we pay taxes is because the government needs money to provide us with the programs and services we use every day, like roads and highways, visits to the doctor or the hospital, or skating at the community centre. If your kids go to public school, let them know that it too is funded by the government with taxes.
You can even get your children involved in tax season. When my kids were young, they would help me sort and organize my business expenses from the receipts I had collected, making piles for parking, gas, meals and entertainment, and office supplies, to name a few. I explained that I was able to deduct any reasonable cost of running my consulting business against the revenues I earned and that these receipts were the proof. (They were even more helpful once they took grade 11 accounting!)
Tax Credits & Deductions
You can make taxes relevant and interesting to your kids by explaining that some of the things they do actually help lower your taxes. For example, if your kids attend a parochial school, you may be entitled to claim some of the tuition as a charitable donation (the school will provide a receipt with a breakdown). Some of their extracurricular programs provide tax savings too. If they take gymnastics or hockey, you can claim the children’s fitness amount; or if they’re enrolled in guitar lessons, you can claim the children’s arts tax credit. And because raising kids is “taxing”, you can claim a child tax credit for kids under 18.
Your kids may be interested to learn that the amount you pay their babysitter or nanny, daycare centre, or day camp, while you go to work (or school) may be deductible as a child care expense. The maximum is $7,000 for kids under 7 and $4,000 for kids 7 and older, up to age 16 ($10,000 for children who qualify for the disability tax credit).
In my next post, we’ll look at how to teach teenage and young adult children about taxes.
Sound familiar? New Year’s resolutions can tend to fall by the wayside as people start to get busy in the spring. Filing your tax return can quickly get relegated to the bottom of your to-do list, leaving you scrambling the week before the deadline.
Procrastinators rejoice! The tax deadline has been extended to May 5 this year, but the best thing you could do for yourself is to forget I just told you that. If you are expecting a tax refund, it’s in your best interest to file now. Even if you anticipate paying income tax this year, filing early will save you from worrying about penalty fees.
If you’ve already filed your taxes, congratulations! If you haven’t yet, you are probably from Manitoba, which is the top procrastinating province in Canada based on the number of people who have filed with TurboTax. According to TurboTax data, Calgary is leading the pack with 46,196 people having filed their taxes. At a close second is Toronto (44,626), followed by Edmonton (27,503) and Vancouver (22,216).
Generation Y is leading the way in filing their taxes this year, making up 38.7 per cent of total returns filed. It might be time to pay a visit to mom and dad for a quick tax tutorial as Baby Boomers are lagging behind with only 21.9 per cent having filed so far. The good news is, it’s never been easier to get your taxes over with by filing online.
Fantasizing about what to do with that big cheque? Here are the top three things you can do you’re your refund, and why filing earlier can save you some money:
When filing taxes electronically, most Canadians receive their refund within eight days after filing. This is most likely the biggest cheque you will receive all year. What are you waiting for?