By Robin Taub, CPA, CA
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.
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.