From diapers to daycare to college, parents incur many expenses. Fortunately, the Canada Revenue Agency cuts parents a bit of a break by offering tax deductions and other tax benefits. Greg Kauffeldt, a senior tax manager at an Ottawa, Ontario-based accounting firm, said he sees many parents who are eligible for tax credits for “child fitness, childcare and credits for children under 18” to name a few. By using free Canadian tax preparation software, you can ensure you take full advantage of all tax benefits to which you are entitled. Using free tax software programs has become a trend with those who file online. The CRA reports that, as of publication, more than 65 percent of returns are filed electronically.
Preparation is Key
When using free tax software, it is a good idea to review any eligibility requirements the software has. Some software programs require that you use the pay version if your household income exceeds a certain amount or, they will only allow you to use the free version if you have a simple tax situation (if you only have one T1 form, for instance). For example, one program only allows those taxpayers with incomes of under $20,000, students, those who receive a guaranteed income supplement or first-time filers to use the free version.
Having a clear copy of last year’s return ready to go is incredibly useful when completing this year’s tax return. Not only can you use last year’s return as a basis for comparison, but most free tax software programs will allow you to upload last year’s return right into the system. If you have your receipts that prove your expenses, T4 and T5 statements and other documentation right there and ready to go, this will also make your filing process much smoother. It’s also wise to have everyone’s social insurance numbers ready for all members of your family, because your SIN is an essential piece of information for tax purposes. Finally, it’s a good idea to make sure your address and personal information are up to date with the CRA. If you need to make changes, you can go on to the CRA’s website under the “my account” section and make any needed changes.
Find Every Tax Benefit
“Most parents are pretty aware of certain credits, (especially those) that receive media attention,” Kauffeldt says. Credits such as the child tax credit and the Universal Child Care Benefit are well known to most people. The child tax credit provides federal credit for children under 18, and the UCCB provides money per month to families with children under the age of 6. As of publication, the UCCB provides $100 per month per child. It’s the more obscure credits, such as credit you receive for arts, that parents are less aware of, Kauffeldt says. The arts credit is a credit of up to $500 for parents of children who took part in an eligible artistic or cultural program. To ensure you receive every tax benefit to which you are entitled, make sure you accurately answer all of the questions the tax software program asks you.
Take Advantage of Transfers
Spousal transfers allow you to use some of your spouse’s non-refundable credits in the event that your spouse has more than enough non-refundable credits to reduce her tax liability to zero. The credits you are allowed to transfer to your spouse include: the age amount, the child tax credit, the disability amount, the pension income amount, and credit for tuition, textbooks and education expenses. You can also use some of your child’s tax credits. According to Kauffeldt, “your child can transfer up to $5,000 of tuition to either parent.” Additionally, in some cases, your child may be able to transfer his disability tax credit to you as well.
Compare a Few Different Scenarios
Using free tax preparation software, you’re able to instantly calculate the amount of your tax refund or how much tax you’ll owe. Therefore, you can compare a few different scenarios and decide on the optimal scenario for your situation. Some credits can only be claimed by one spouse, such as the child tax credit and the spouse or common-law partner amount. Other credits can be split between you and your spouse, including the homebuyer’s amount. By running the numbers a few different ways, you can decide how to get the biggest refund or save the most money.
Parents often have dynamic lives. Each year, new expenses arise, from school clothes to costs for sports programs. When completing your tax return using free tax software this year, you can keep track of any extra amount of tax credits you have and potentially forward some of them to next year’s tax return. Also, if you end up being entitled to a refund this year, you can have your refund directly deposited into your account. According to the CRA, refunds may arrive in as little as eight days when you opt for direct deposit.
References & Resources
- Greg Kauffeldt, Senior Tax Manager at McCay Duff LLP, Ottawa, O.N.
- CBC News: 6 Ways That Deferring Tax Credits, Deductions Can Pay Off
- Canada Revenue Agency: Child and Family Benefits
- Canada Revenue Agency: Social Insurance Number (SIN)
- Canada Revenue Agency: File Your Taxes Online For Free
- Canada Revenue Agency: Line 318 – Disability Amount Transferred From a Dependant
- Canada Revenue Agency: Can You Claim the Transfer of Certain Amounts From Your Spouse or Common-Law Partner?