BRIEFING NOTES FOR 2014 TAX RETURNS TAX PREPARATION ASSISTANCE

Transcription

1 2015 TAX PREPARATION ASSISTANCE BRIEFING NOTES FOR 2014 TAX RETURNS TAX PREPARATION ASSISTANCE

2 CONTENTS Introduction 3 Tax Preparation Software 3 EFILE 3 Section A. Income Criteria 4 Section B. Responsibilities 4 Section C. General Tax Guidelines 7 What s New for Federal/Ontario Non-Refundable Tax Credits Chart 8 Section D. Items to Watch Out For: 10 Seniors 10 Low-Income Earners 15 New Immigrants 17 Section E. Summary of Points to Remember for: 18 Seniors 18 Students 19 Single Parents 20 Summary of Required Attachments (for paper-filed returns) 21 Appendix A Medical Expenses 22

3 BRIEFING NOTES FOR 2014 TAX RETURNS 3 Introduction Chartered Professional Accountants will provide assistance in preparing income tax returns for those in need, free of charge, as part of a voluntary program. This service is not to include advice and it is the taxpayer s responsibility to ensure that the tax return is correct and complete. These Briefing Notes are intended to assist volunteers in the preparation of tax returns. The notes contain information about the taxability of income, tax deductions and tax credits that are common to the returns of low income individuals. Other good sources of information are the Canada Revenue Agency s (CRA s) T1 Guide, CRA s Information Sheet for Residents of Ontario and CCH s Preparing Your Income Tax Returns 2015 Edition For 2014 Returns. Tax Preparation Software This year there are two choices of free tax preparation software available to you should you choose to use software to prepare the tax returns. CPA volunteers will be able to download the Personal Taxprep software free, for use at the Tax Sessions only, courtesy of Wolters Kluwer. CPA volunteers interested in receiving further information about downloading this software should contact Paula Duncan at pduncan@cpaontario.ca. Access to UFile is provided through the Canada Revenue Agency s Community Volunteer Income Tax Program (CVITP). In order to access the UFile software, you must complete the online registration form for the CVITP (follow the link at cra-arc.gc.ca/tx/ndvdls/vlntr/lnd-eng.html). Select Chartered Professional Accountants of Ontario as the organization with which you are affiliated. Once you have completed this registration process, and registered for a location, you will receive instructions for downloading the software (and an activation key) typically in mid-february from a Tax Preparation Assistance co-ordinator ( tpa@cpaontario.ca if you need more information). EFILE If you use the UFile tax preparation software you may choose to EFILE returns for the CPA Ontario Tax Preparation Assistance clients, if the Agency location has WIFI access. You will need to register for an EFILE number with CRA by following the link at cra-arc.gc.ca/tx/ndvdls/vlntr/lnd-eng.html. Please note that, even if you have an EFILE number for your business, you should register for a different number to EFILE the returns that you prepare as a volunteer. Enter the following information in these sections of the EFILE registration process: Return(s) Type Indicate that you will only be transmitting T1 returns and you will not be transmitting Form T1013, Authorizing or Cancelling a Representative. Business Information Under Business Type, indicate that you are a volunteer. In Part D, enter your name and SIN. Select Volunteer as your title or office. Authorization Indicate that you do not want to authorize CRA to release your name, address and telephone number to the public. You will receive an with your EFILE number and password. Again, please note that this can take up to 30 days, so please register early.

4 4 CPA ONTARIO 2015 TAX PREPARATION ASSISTANCE A. Income Criteria Total income per household (e.g., husband and wife) unit for taxpayer: With no dependants: less than $25,000 With dependants: less than $35,000 Volunteers do not prepare complex returns, such as returns for individuals who: have self-employment income, have business or rental income and expenses, have capital gains or losses, have employment expenses, file for bankruptcy, or died during the year. All agencies are required to adhere to the income guidelines and screen potential clients beforehand. The agency co-ordinator is responsible for informing the taxpayers that his or her tax return cannot be completed at the CPA Tax Preparation Assistance session. NOTES: Income can be in any currency as long as it is within the income guidelines (once translated into Canadian dollars). Interest income, investment income, etc. are considered as income subject to the income criteria. If there are two or more individuals in one household employed, the combined income must not exceed the total above. All members of a household will require appointments on the same evening. For a married or common-law couple, the income tax and benefit return on the lowerincome spouse/partner should be completed first. Some CPA Ontario Tax Preparation Assistance sessions may be able to prepare the prior two years returns as well (i.e., 2012 and 2013); a separate appointment is to be booked for each return, and the agency and taxpayer are responsible for having the appropriate forms on hand. B. Responsibilities CPA VOLUNTEER Volunteers should not assist in preparing any return that contains information or statements you have any reason to believe are false or misleading, or a return that omits relevant information. All volunteers must confirm their commitment to: Protect the taxpayer s privacy by never using or divulging any information provided by the taxpayer for any purpose other than the preparation of his or her income tax and benefit return; Offer their services free of charge and decline any monetary reward that may be offered; Return the completed income tax and benefit return to the taxpayer or authorized representative; Not keep any copies of a taxpayer s income tax and benefit return (paper or electronic); Have the taxpayer sign an authorization form and return it to the taxpayer; Only use any tax software provided by the CPA Ontario Tax Preparation Assistance program to prepare returns for eligible taxpayers; Not use the tax software for monetary gain Not copy or allow copies to be made of the tax software; Encrypt taxpayers returns using the tax software and save electronic copies only on an encrypted USB flash drive, and transmit the return to the CRA immediately (if you EFILE returns); and Delete all electronic copies of the taxpayer s return, no later than 48 hours after its transmission to and acceptance by the CRA. There are several ways that volunteers can confirm these commitments. These questions were part of the Volunteer Form that some volunteers completed. These same questions were included in the online registration for the CRA CVITP for those who choose to use the UFile software. There is also a separate

5 BRIEFING NOTES FOR 2014 TAX RETURNS 5 form for those who did not complete the Volunteer Form, or were not planning on using the UFile software. We apologize if you have had to complete more than one version! Please remember to bring a calculator, a stapler, scissors, paper clips, and some blank paper in case a schedule is required (e.g., list of medical expenses or donations). Also, if you have access to blank T1 returns, bringing a few extras will help out a taxpayer who forgets their return (if you are preparing paper returns). You may also want to bring some extra copies of the Pension Income Splitting form (T1032, available on the CRA s website). Please also confirm your attendance with the agency prior to the day of the session. Also, advise them if you will be bringing a laptop (and printer) so as to ensure that you will have a spot to plug it in. If you are authorized to EFILE tax returns prepared under the Tax Preparation Assistance program, you should also confirm whether the agency has internet access. Agency Co-ordinator Pre-screen taxpayer and book appointments for those who meet income criteria. Contact each volunteer to confirm booking at their location and that they have confirmed their commitments (as noted above). Confirm attendance of clients booked and review required documents needed to be brought to the CPA Ontario Tax Preparation Assistance session. Inform taxpayers who do not qualify under the income criteria that their return cannot be completed at the CPA Ontario Tax Session (once notified by the CPA Ontario volunteer). Order T1 General forms and return envelopes for manual returns (or those prepared using software programs and printed out to be mailed to the CRA). Have sufficient copies of the CPA Ontario Tax Preparation Assistance Authorization Form (or the CRA TIS60 Community Volunteer Income Tax Program Authorization Form) for each return to be prepared. Taxpayer Bring a copy of their 2013 income tax return including their 2013 Notice of Assessment (which will include the taxpayer s RRSP contribution limit statement). Provide their Social Insurance Number and spouse s/common-law partner s Social Insurance Number. Provide a list of dependants and birth dates (day, month and year). This information is relevant for child care expense claims, claims for an eligible dependant credit, etc. The taxpayers must complete an authorization form to authorize the volunteer to prepare their income tax and benefit return. If they are mailing their tax return, they must complete the CPA Ontario Tax Preparation Assistance Authorization Form, or Section I of CRA s TIS60 form (these are essentially the same form). If the taxpayer wants you to file their return electronically, both you and the taxpayer must complete Section II of the TIS60. NOTES: The Income tax and benefit returns that are prepared by volunteers and submitted electronically through the CPA Ontario Tax Preparation Assistance program are different than those submitted through your own professional practice; in that the taxpayer cannot authorize the tax preparer to deal with the CRA on their behalf either by completing form T1013, Authorizing or Cancelling a Representative, or by completing Section D of form T183, Information Return for Electronic Filing of an Individual s Income Tax and Benefit Return (form TIS60 replaces the remainder of form T183 for tax returns transmitted by EFILE under the CPA Ontario Tax Preparation Assistance program).

6 6 CPA ONTARIO 2015 TAX PREPARATION ASSISTANCE Bring information slips as follows: T3 Statement of trust income T4 T4A T4A(OAS) T4A(P) T4RIF T4RSP T4E T5 T5007 T2201 T2202A RC62 RC210 Salary and wages (make sure you pick up any charitable donations or union dues) Pension, retirement, annuity and other income (scholarships) Old Age Security benefits Canada Pension Plan benefits Registered Income Fund income Registered Retirement Savings Plan income Employment Insurance benefits Interest and dividend payments Worker s Compensation/Social Assistance Payments Disability certificate (if first year of claim or previous one has expired) Tuition, education and textbook amounts certificate Statement of Universal Child Care Benefit Working Income Tax Benefit Advance Payments Statement Bring receipts/supporting documentation for: Child care expenses (plus caregiver s Social Insurance Number) you will need Form T778, Union dues, Tuition fees, Medical expenses, Charitable donations, RRSP contributions, PRPP contributions, Interest expense, Student loan interest, Political donations, Adoption expenses, Public transit passes and electronic payment cards, Children s fitness, arts and other qualifying activity expenses, First-time home buyer s house purchase, and Eligible expenses for the Ontario Healthy Homes Renovation tax credit. The chart at the end of these notes summarizes the slips that have to be attached to the taxpayer s paper return if it is mailed to CRA. If the return is transmitted by EFILE, it is helpful to print the Tax Return Summary from the software, and attach the slips to that form. Taxpayers should be advised to keep all documentation for six years. In addition, the following information is needed: Details of spouse s/common-law partner s income including the amount of his or her Universal Child Care Benefit (if applicable); Details of dependant s income (if claiming medical expenses or other tax credits such as the amount for an eligible dependant); Property tax bill and/or details of total rent paid during the year and all addresses of places of residence during the year for Ontario tax credits, home energy costs on a reserve and/or public long-term home accommodation payments; Details of any alimony and maintenance payments received or paid; If new immigrant, date of arrival in Canada; and If claiming tax credits for non-resident spouse or children, dates of birth, complete addresses and proof of payment (generally receipts for money orders) for funds sent to dependants.

7 BRIEFING NOTES FOR 2014 TAX RETURNS 7 What if the taxpayer is missing income slips? If the taxpayer knows that they will not be able to get a slip by the tax return due date, they should attach to their paper return a note stating the payer s name and address, the type of income involved, and what they are doing to get the slip. To calculate the income to report, and any related deductions and credits that they can claim, use any stubs they may have and attach them to their paper return. C. General Tax Guidelines Federal What s New for 2014 Below are some of the major changes listed in the Canada Revenue Agency General Income Tax and Benefit Guide 2014 (CRA T1 Guide). Page numbers below refer to the CRA T1 Guide: Manage online mail When you register for online mail, the CRA will no longer mail your notices to you. Instead, you will receive an notification that there is mail for you to view on the My Account secure online service at cra.gc.ca/myaccount. Have your tax record in a secure place online! For more information, see address on page 10 and Manage online mail on page 60. Family tax cut (line 423) You may be able to claim a non-refundable tax credit of up to $2,000 to reduce your federal income tax. For more information, see page 53. This will only have an impact when total family income is greater than $43,953 (i.e., there has to be some income taxed at a higher marginal rate or there is no benefit to splitting the income ) so this should never be an issue for taxpayers whose returns are prepared in the CPA Ontario Tax Preparation Assistance program. Emergency services volunteers (line 101) The rules for the $1,000 exemption for emergency services volunteers have changed. For more information, see page 13. Adoption expenses (line 313) The maximum amount of eligible expenses for each child has increased to $15,000. For more information about adoption expenses, see page 43. Medical expenses (lines 330 and 331) Costs for the design of personalized therapy plans for persons eligible for the disability tax credit and costs for service animals used to help manage severe diabetes are now eligible as medical expenses. For more information, see Guide RC4064, Medical and Disability- Related Information. Children s fitness amount (line 365) The maximum amount of eligible fees for each child has increased to $1,000. For more information, see page 41. Search and rescue volunteers amount (line 395) As a search and rescue volunteer, you may be able to claim an amount of $3,000. For more information, see page 40. Investment tax credit (line 412) Eligibility for the mineral exploration tax credit has been extended to flow-through share agreements entered into before April For more information about investment tax credits, see page 51. GST/HST credit You no longer have to apply for the GST/HST credit. When you file your return, the CRA will determine your eligibility and tell you if you are entitled to receive the credit. For more information about the GST/HST credit, see page 7. Ontario What s New for 2014 (CRA s Information for Residents of Ontario) Community Food Program Donation Tax Credit (box 6098, ON(428)) There is a new non-refundable tax credit the community food program donation tax credit for farmers. This credit applies to eligible donations of agricultural products by farmers or their spouses or common-law partners.

8 8 CPA ONTARIO 2015 TAX PREPARATION ASSISTANCE Federal/Ontario Non-Refundable Tax Credits Chart Tax credit base amounts are calculated for each type of credit. These base amounts are totaled and a non refundable tax credit is calculated at 15% (for federal tax purposes) and 5.05% (for Ontario tax purposes) of the total (except for donations which have a tiered rate). The base amounts are as follows: Fed. Sch. 1/Ont. ON428 Description of Credit Description of Credit Ontario Base Amount ($) 300/5804 Basic personal amount 11, , /5808 Note 1 Age amount (born in 1949 or earlier) (subject to reduction starting at net income of $34,874 (federal) / $35,147 (Ontario)) 6, , /5812 Note 1 and 2 305/5816 Note 1 and 2 Spouse or common-law partner amount (less spouse/partner s net income (federal)/net income over $821 (Ontario) - complete Schedule 5) Amount for an eligible dependant (less dependant s net income (federal)/net income over $821 (Ontario) - complete schedule 5) 11, , , , Note 2 Amount for children born in 1997 or later 2, per child n/a 306/5820 Note 1 Amount for infirm dependant age 18 or older (Schedule 5) (less net income over $6,607 (federal) / $6,478 (Ontario)) 6, , /5824 CPP Employee (amount contributed) Maximum 2, /5832 Employment Insurance (amount contributed) Maximum Same as federal amount Same as federal amount 362 or 395 Volunteer firefighters amount or Search and rescue volunteers amount 3, n/a 363 Canada employment amount (lesser of employment income and $1,127) Maximum 1, n/a 364 Public transit amount Eligible amount paid in respect of travel in 2014 n/a 365 Children s fitness amount (maximum $1,000; higher amount for infirm child see CRA T1 Guide) 370 Children s arts amount (maximum $500; higher amount for infirm child see CRA T1 Guide) Qualifying fees paid in 2014 Qualifying fees paid in 2014 Note 3 Note Home buyers amount Maximum 5, /5833 Adoption expenses Maximum 15, n/a Maximum 11, /5836 Note 1 Pension income (amount received) Maximum 2, Maximum 1,337.00

9 BRIEFING NOTES FOR 2014 TAX RETURNS 9 315/5840 Note 1 and 2 Caregiver amount (less dependant s income over $15,472 (federal)/$15,593(ontario) complete schedule 5) Maximum 4, Maximum 4, /5844 Note 1 Disability Self 7, , /5844 Note 1 Disability Supplemental credit (persons under 18 years old) (restricted by child care expenses and attendant care expenses (as a medical expense or a disability supports deduction) in excess of $2,654 (federal)/$2,669 (Ontario)) 4, , /5848 Note 1 Disability Other dependants Base amount = $7,766 (federal) / $7,812 (Ontario) Supplement amount for persons under 18 years old) = $4,530 (federal) / $4,557 (Ontario) with the child care and attendant care expense limitation see line 316 Maximum for each dependant 12, Maximum for each dependant 12, /5852 Interest paid on your student loans (can also claim carryforward amounts five years) 323/5856 Tuition fees (over $100 calendar year only per institution) and education and textbook amounts. (Schedule 11 and ON(S11)) T2202A required but does not have to be attached to return (can also claim carryforward amounts) 324/ tuition, education and textbook amount transferred from a child resident in Ontario Amount paid in 2014 (plus cfwd) Tuition - Amount paid in respect of 2014 Education and textbook amounts: each month full time each month part time Maximum 5, Same as federal amount Tuition Amount paid in respect of 2014 Education amounts: each month full time each month part time Maximum 6, /5864 Amounts transferred from spouse or common-law partner (Schedule 2 and ON(S2)) Note 4 Note 4 330/5868 Medical expenses for self, spouse or common-law partner, and dependant children born in 1997 or later (attach schedule, no specific form; taxpayer to keep receipts in case the CRA asks for them) Amount paid in excess of the lesser of $2,171 and 3% of net income Amount paid in excess of the lesser of $2,188 and 3% of net income 331/5872 Note 1 Allowable amount of medical expenses for other dependants (taxpayer to keep receipts in case the CRA asks for them) Amount paid in excess of the lesser of $2,171 and 3% of dependant s net income No maximum Amount paid in excess of the lesser of $2,188 and 3% of dependant s net income Maximum 11, /5896 Note 5 Donations (Schedule 9) - current year plus 5-year carryforward of donations not yet claimed Calculated on Schedule 9 and Schedule 1 Calculated on Schedule 9 and ON(428) See page 10 for Notes 1 to 5.

10 10 CPA ONTARIO 2015 TAX PREPARATION ASSISTANCE Explanatory Notes to Non-Refundable Tax Credits Chart Note 1 Use federal and Ontario provincial worksheets provided with tax forms to calculate these non refundable tax credits. For lines 303, 305, 306 and 315 complete and attach federal Schedule 5. Note 2 Taxpayers supporting infirm dependants may also be eligible to claim the family caregiver amount ($2,058 for 2014) for federal tax purposes, which would increase the federal amount outlined in the chart above see the T1 Guide for further details. Note 3 For Ontario tax purposes, the Children s Activity Tax Credit is a refundable credit for children under 16 years of age (born in 1998 or later) or for children with a disability under age 18 (born in 1996 or later) in a qualified program as defined by the province and includes both fitness and non-fitness activities. Maximum refundable credit is $54.10 per year per child or 10% of total eligible expenses per year per child, if less. Complete ON479. Note 4 Unused base amounts for the age, amount for children born in 1997 or later, disability, tuition, education and textbook, and pension credits can be transferred to a taxpayer s spouse/ common-law partner. Note 5 Temporary First-Time Donor s Super Credit (FDSC) (Schedule 9, line 343 (Federal) / not applicable for Ontario) For 2013 to 2017, a first-time donor can claim up to $1,000 of donations of money made after March 20, 2013 for this tax credit. This non-refundable tax credit effectively adds 25% to the rates used in the calculation of the charitable donations tax credit for up to $1,000 of monetary donations. An individual will be considered a first-time donor if neither the individual nor the individual s spouse or common-law partner has claimed the charitable donations tax credit in any year after D. Items to Watch Out For: Seniors Taxpayers Aged 65 and Over at Any Time During 2014 (Born 1949 Or Earlier) Income 1. Old Age Security Pension and Net Federal Supplements T4A (OAS) Guaranteed Income Supplements and spouse s allowances are not taxable, but are added to the spouse s net income to determine the spousal exemption amount, amounts transferred from spouse, the Child Tax Benefit and the GST/HST Credit. Include these amounts on line 146 and deduct at line 250 of the T1 jacket. 2. CPP Benefits T4A(P) including survivor benefits. 3. Pensions and Superannuation T4A Note: Veteran disability payments, dependant pensioners payments and war veteran s allowances are not taxable and are not included in net income. The taxpayer may receive certain foreign source amounts -- especially government pensions -- which may be taxed in the country of origin but not taxed in Canada. Where the amount is not taxed in Canada, an offsetting deduction is allowed for all or part of that pension amount, as discussed further below. Note: if the income amounts have been received over the course of the year, use an average exchange rate for the year to translate the amounts (i.e., not a year-end rate). See below for more details on the Canadian tax treatment of foreign pensions.

11 BRIEFING NOTES FOR 2014 TAX RETURNS 11 United States For filing 2014 T1 Returns, U.S. Social Security (including U.S. medicare premiums) should be reported in full on line 115. An offsetting deduction for 15% of the amount is claimed on line 256. If the taxpayer has been a resident of Canada and received U.S. Social Security benefits continuously during the period starting before January 1, 1996 and ending in 2014, the taxpayer can claim a deduction equal to 50% of the U.S. Social Security benefits received in See line 256 the T1 Guide for further information. United Kingdom Periodic pension payments are reported in the country of receipt (i.e., where the taxpayer is resident). Report the income on line 115. No exemption is available. Germany Amounts received from Germany, or a Land or a governmental instrumentality thereof as compensation for an injury or damage sustained as a result of hostilities or past political persecution are exempt in Canada. A portion of the benefits under German social security legislation may be taxable in Canada. Starting in 2003, under the new Canada- Germany Tax Treaty that came into force in 2002, benefits paid under German social security legislation to someone resident in Canada are taxable in Canada to the extent the benefits would be taxable in Germany. In 2003 and 2004, this portion is roughly based on the income earned in the pension with the taxable portion dependent on the age of the taxpayer on the date the pension payments first began. The CRA provided specific rates for those years. The taxation of German pensions changed for 2005 and subsequent years due to a reform of the taxation of retirement income in Germany. As a result, the calculation of the taxable and nontaxable portions of this pension income in Canada has been adjusted. The CRA has provided guidance on this calculation including examples and a table of rates. The calculation will apply to all persons who are already receiving a pension or who will start receiving a pension for the first time in Under these rules, 50% of the social security benefits covered under the tax treaty will be taxable in 2005; the other 50% is non-taxable. For those who start receiving a pension after 2005, the rate for the taxable portion will increase and the rate will apply based on the first year of receipt. The 2014 rate (for the taxable portion) is 68%. The applicable date can be found on the notice issued by the social security administration when the pension was granted. On the first page, you will find this sentence: Die Rente beginnt am [xxx date]. (The pension starts on [xxx date].) Taxpayers should keep the notice for possible future verification. Note that the non-taxable portion of the pension becomes a fixed amount in the year following the year in which the pension is first received and will not change over the period of time the pension is received (except in the year of death). Note also that it is required to be converted using the yearly average exchange rate. Refer to the examples and rate chart provided by the CRA at the following website: cra-arc.gc.ca/tx/nnrsdnts/ntcs/grmny2005-eng.html For a survivor s pension, use the year the deceased spouse began receiving the pension to determine the rate to apply in the calculation. For retroactive payments, the rate used in the calculation will be determined based on the date of entitlement to the pension income. For German pensions, include the full amount on line 115 and deduct the exempt amount on line 256. To eliminate double taxation on the German social security pension, a foreign tax credit may be claimed against the tax otherwise payable in Canada for the tax paid to the German tax authority (in respect of this pension). If the taxpayer has a pension from Germany and it is unclear whether it is an exempt pension, or it is unclear what portion of the pension is taxable and what portion is exempt, you should arrange with the taxpayer or the site co-ordinator to contact the CRA. The CRA issued a notice on their website titled Additional information regarding the change to the taxation of German social security pensions to advise that German social security pensions are taxable in Germany. As noted above, the individual may then claim a foreign tax credit for taxes paid to Germany in order to eliminate any double taxation on this German social

12 12 CPA ONTARIO 2015 TAX PREPARATION ASSISTANCE security pension. German tax law does not require tax to be withheld from social security pensions Germany pays to residents of Canada. While German tax law generally requires filing a tax return, the German tax administration has introduced a simplified procedure for nonresidents who receive a pension from Germany. Under this procedure, non-residents can file a German tax return, but filing is no longer mandatory. If a tax return is not filed, Germany s Neubrandenburg tax office will assess non-resident pensioners based on the pension they receive and will send the pensioners a notice of assessment together with a reply slip. Note that this update is provided for your information only, as assisting with the German tax filings and assessments is beyond the scope of the Tax Preparation Assistance program. Italy The supplement and military portion of Italian social security benefits ( the Italian supplement ) can only be taxed by Italy and are exempt from tax in Canada. The amount of the Italian supplement will be certified in a document sent to pensioners by Italy. Report the amount of Italian social security benefits received on Line 115 and claim a deduction for the amount of pension exempt from tax on Line 256. The amount of Italian periodic pensions, other than the Italian supplement, pensions paid to war veterans and Pensions for Government Service, that exceeds $12,000 will be subject to a maximum 15% tax in Italy. Include these pensions in income on Line 115 and claim a foreign tax credit for Italian taxes paid. Pensions for Government Service paid by, or out of funds created by, the Italian State or a political or administrative subdivision or a local authority thereof to an individual in respect of services rendered to that State or subdivision or authority are exempt. War veterans pensions and allowances arising in Italy and received by a resident of Canada shall not be taxable in Canada as long as they would not be taxable if received by a resident of Italy. Refer to the CRA notice regarding the taxation of pension payments and social security benefits under the Canada-Italy Treaty: cra-arc.gc.ca/tx/nnrsdnts/ntcs/cndtly-2012-eng.html Spain Government pensions from Spain are exempt (if they are not taxable in Spain). For exempt pensions, include the full amount on line 115 and deduct the full amount on line 256. Other For pensions from other countries, if you are not sure about the tax treatment of the amount, consider the following sources of information: Similar situation in the prior year that has been assessed as filed. Arrange with the taxpayer or site co-ordinator to contact the local district CRA office. 4. Annuity Payments Payments received in the form of annuities from an RRSP, a DPSP or the income portion of a general annuity (from a T5 slip) are normally reported as Other Pensions which qualify for the pension income tax credit for those 65 years of age or older. Note that income that qualifies for the pension amount is also eligible for the pension income splitting rules. Non-Refundable Tax Credit Base Amounts Additional Information 1. Age Amount Taxpayers 65 years of age or older at the end of the year may claim an additional personal exemption amount as outlined in the federal/ontario Tax Credit chart on page 8. Note that for the Tax Preparation Assistance program, no taxpayer should be subject to the age credit clawback noted in the chart.

13 BRIEFING NOTES FOR 2014 TAX RETURNS Pension Income Amount Normally, only annuities from employers or union sources qualify, but annuity payments from maturing RRSPs, RRIFs, DPSPs and the taxable portion of a general annuity also qualify. Also included are most annuities received as a result of the death of a spouse. The maximum credit amount is the lesser of $2,000 (federal) and $1,337 (Ontario) or the qualifying income. Note that if the taxpayer is under 65 years old, certain types of pension income will also qualify for the pension income credit (such as life annuities from pension plans). The T1 forms book contains a federal workchart that should be used to compute eligible pension income (see instructions for Line 314 Pension income amount in the federal T1 guide and for Line 5836 in the Information for Residents of Ontario guide). Not included are old age security benefits, Canada Pension Plan benefits, death benefits, retiring allowances, excess amounts from a RRIF transferred to an RRSP, another RRIF or annuity, amounts shown in boxes 18, 20, 22, 26, 28, and 34 of T4RSP slips, and amounts distributed from a retirement compensation arrangement shown on T4A-RCA slips. The unused portion of the pension amount can be transferred to the taxpayer s spouse/common-law partner on Schedule 2. Income that qualifies for the pension amount is also eligible for the pension income splitting rules. 3. Disability Amount To be eligible, an individual must have had a severe and prolonged impairment in physical or mental functions during An impairment is prolonged if it has lasted, or is expected to last, for at least 12 continuous months. This amount may be claimed if a qualified practitioner certifies on Form T2201, Disability Tax Credit Certificate, that the individual meets certain conditions. For details on qualified practitioners, see form T2201. The maximum amount for 2014 is $7,766 (federal) and $7,812 (Ontario). The unused portion of a disabled dependant s disability amount may also be claimed. The taxpayer s Form T2201 must be completed and filed the first time this amount is claimed, if circumstances have changed or when the time period specified on a form previously filed expires. For federal tax purposes, you can claim up to $10,000 as a medical expense for amounts paid for full-time or part-time care by an attendant in Canada without impairing the disability credit. For Ontario tax purposes, the maximum claim for attendant care expenses is $13,372. Alternatively, a medical expense claim can be made for all amounts paid for the individual for full-time care by an attendant or for full-time care in a nursing home, and certain other care expenses, but nobody will be allowed to claim the disability amount of the disabled individual. Keep in mind that attendant care payments may be claimed only once as a medical expense on line 330 or 331 or as a deduction on line 215 (only the taxpayer suffering the disability may claim the deduction at line 215). For information on claiming disability amounts and the eligibility of attendant care expenses (i.e., certain conditions must be met to claim the expenses), refer to CRA s guide Medical and Disability-Related Information (RC4064). See also the comments under point 5 (below) on medical expenses. 4. Eligible Amounts Transferred from Spouse/Common-law Partner Certain amounts may be transferred by the taxpayer s spouse/common-law partner to the taxpayer, if the spouse/ common-law partner does not need them to reduce their federal tax to zero. The credits that may be transferred include: the pension income amount (credit); the amount for children born in 1997 or later; the age exemption for taxpayers 65 years of age or older; the disability amount; and the tuition, education and textbook amount. 5. Medical Expenses Claim both spouses or common-law partners expenses on the same return. To get the maximum benefit, claim the combined expenses on the return of the lower income spouse/common-law partner as the medical expense credit claim is reduced by 3%

14 14 CPA ONTARIO 2015 TAX PREPARATION ASSISTANCE of net income. However, ensure that the medical expense claim is not wasted (i.e. don t claim medical expenses on a return that cannot use the credit). Remember that payments to private medical plans for drug or dental plans are creditable medical expenses. Medical expenses can be deducted for any 12-month period that ends in 2014 and not claimed in Therefore, try to group large expenses together in the same 12-month period. See the CRA s T1 guide Line 330 for the most common allowable medical expenses (see attached Appendix A). The individual may also be eligible for the federal refundable medical expense supplement (line 452), if they are earning a certain level of employment or self-employment income and meet certain other conditions. It s important to enter the medical expenses even if the taxpayer doesn t need the regular non-refundable credit. Payments of the Ontario Trillium Benefit Payments for the Ontario Sales Tax Credit (OSTC), the Ontario Energy and Property Tax Credit (OEPTC) (further information provided below) and the Northern Ontario Energy Credit (NOEC) are combined as the Ontario Trillium Benefit (OTB). The 2015 OTB will be issued monthly from July 2015 to June However, an individual can elect to receive their 2015 OTB in one payment in June 2016 instead of receiving it monthly. If the taxpayer would like to proceed with the one payment option, tick box 6109 on Form ON-BEN to make the election for this option; otherwise the payments will be received monthly. Note that the calculation of the OTB is not done on Form ON-BEN -- this will be computed by the CRA from information provided on this form. In order to receive the OEPTC and NOEC, individuals must apply for them by completing and attaching Form ON-BEN to their 2014 tax return. Note that the CRA will use information from the 2014 return to determine eligibility for the OSTC. If the taxpayer lived with a spouse or common-law partner on December 31, 2014, only one of them can apply for the OTB. If only one spouse or common-law partner is 64 years of age or older on December 31, 2014, that spouse or common-law partner has to apply for these credits/grants for both of the taxpayers. In order to receive the OSTC and the OEPTC, the individual must be a resident of Ontario at the beginning of the month to receive that month s payment, and to receive the NOEC, must be a resident of Northern Ontario at the beginning of the month. Ontario Energy and Property Tax Credit (OEPTC) Seniors are entitled to the OEPTC when they meet the conditions for eligibility. Note also that there is a higher net income threshold for seniors (compared to other individuals) in determining the amount of these credits. All Tax Preparation Assistance program clients who are eligible seniors should complete the Form ON-BEN to apply for this credit as part of the Ontario Trillium Benefit. Note: For married or common-law partners, only the individual who applies for the 2015 Ontario Senior Homeowners Property Tax Grant (discussed below) can apply for the 2015 Ontario Trillium Benefit with their 2014 return. For more details on eligibility and applying for this credit, refer to this year s version of CRA s Information for Residents of Ontario. For further information, refer to the Ontario Energy and Property Tax Credit Questions and Answers on the CRA s website.

15 BRIEFING NOTES FOR 2014 TAX RETURNS 15 Ontario Senior Homeowners Property Tax Grant (OSHPTG) Taxpayers can apply for the 2015 Ontario Senior Homeowners Property Tax Grant if the following conditions are met on December 31, 2014: the taxpayer was 64 years of age or older, and the taxpayer owned and occupied a principal residence in Ontario, on which the taxpayer (or someone on their behalf) paid property tax for the 2014 year. The maximum amount of the grant for 2015 is the lesser of $500 and the taxpayer s property tax paid for Eligible single seniors with income of up to $35,000 a year will receive the maximum grant and eligible senior couples with income up to $45,000 a year will receive the maximum grant. The grant is not provided automatically. To receive it, the taxpayer must complete and attach Form ON- BEN to their 2014 tax return. The 2015 grant will be based on the information provided on the 2014 tax return. The taxpayer should receive the grant within 4 to 8 weeks after they receive their 2014 Notice of Assessment. For further information, refer to the Ontario Senior Homeowners Property Tax Grant Questions and Answers on the CRA s website. Ontario Healthy Homes Renovation Tax Credit (box 6311 on ON(479)) There is a tax credit for seniors and individuals living with seniors to help with amounts paid or incurred for permanent home renovations to generally improve the home or land for a senior s access or mobility. See this year s version of CRA s Information for Residents of Ontario for further details, including a detailed list of eligible expenses (and a list of expenditures that are not eligible). Attach completed Schedule ON(S12) to the return. Other supporting documents do not have to be attached to the paper return but should be retained by the taxpayer. D. Items to Watch Out For: Low-Income Earners Income Employment Income T4 EI Benefits T4E The repayment provisions should not apply in Tax Preparation Assistance program circumstances. Alimony, Separation, or Maintenance Payments Periodic payments or payments to a third-party pursuant to a written agreement or court order are generally taxable, but normally lump-sum receipts are not taxable unless they represent accumulated periodic amounts. Remember that the rules for child support may apply to the individual see Line 128 in the T1 Guide and the Support Payments Guide (P102) for further details. Workers Compensation T5007 Payments received from a federal or provincial compensation plan included in computing net income on line 144 and deducted from net income on line 250 (i.e. not taxable but may affect a personal exemption, credit transfer, Child Tax Benefit or GST/HST Credit). Social Assistance Payments and Other Non-Taxable Receipts T5007 This includes payments received from a registered charity or under a federal or provincial program, if made on the basis of a means, need or income test. Taxpayer may have received a slip T5007 for this income. Include the amount on line 145 and deduct at line 250 (i.e., not taxable but may affect a personal exemption, credit transfer, Child Tax Benefit or GST/HST Credit). If the taxpayer lived with their spouse or common-law partner when the payments were received, the individual who has the higher net income (Line 236, but

16 16 CPA ONTARIO 2015 TAX PREPARATION ASSISTANCE not including these payments or the deductions on Line 214 Child care expenses or Line 235 Social benefits repayment) has to report all of the payments, no matter whose name is on the T5007 slip. Note that the taxpayer does not have to include social assistance payments (where certain conditions are met) that they received for being a foster parent or for caring for a disabled adult who lived with the taxpayer. Contact the CRA for details or refer to the CRA s Income Tax Technical News No. 31R2. However, if the payment is for caring for the taxpayer s spouse or common-law partner or an individual related to the taxpayer (or their spouse/common-law partner), whoever has the higher net income will have to include those payments in income. Universal Child Care Benefit RC62 Taxable in the hands of the lower-income spouse or common-law partner. Other Working Income Tax Benefit (WITB) (Line 453) The WITB is a refundable tax credit for low-income individuals and families who have earned income from employment or business and who were resident in Canada throughout the year. Certain other conditions apply -- refer to Schedule 6 for further details. Remember to file Schedule 6 if the taxpayer is eligible. There is the option to apply for WITB advance payments so that payments amounting to a maximum of 50% of the expected 2015 WITB refundable tax credit claim on the tax return would be paid in advance. Any further entitlements will be provided once the 2015 T1 tax return is assessed. To receive WITB advance payments, an application would have to be submitted after January 1 and before September 1 each year by completing Form RC201, Working Income Tax Benefit Advance Payments Application. After the application is processed, the WITB advance payment will be divided by the number of remaining payments for the year and will be paid in equal instalments. The payments are issued in April, July and October 2015, and January Note that if the taxpayer has received WITB advance payments in 2014, enter the amount from Box 10 of RC210 on their 2014 tax return at Line 415 of Schedule 1.

17 BRIEFING NOTES FOR 2014 TAX RETURNS 17 D. Items to Watch Out For: New Immigrants Income For the part of the year that the taxpayer was a resident of Canada, they have to report their world income. World income is income from all sources, both inside and outside Canada. For the part of the year that the taxpayer was not a resident of Canada, they have to report only the following income: income from employment in Canada or from a business carried on in Canada; taxable capital gains from disposing of taxable Canadian property; and the taxable part of scholarships, fellowships, bursaries and research grants they received from Canadian sources. Moving Expenses If the taxpayer has moved to Canada in 2014, they generally cannot deduct moving expenses incurred to move to Canada. However, students may be able to deduct certain moving expenses see the T1 Guide for conditions that must be met to deduct moving expenses. For further information and to calculate the moving expense claim, see Form T1-M. Note that both Form T1-M and the receipts do not have to be filed with the return, but should be retained. Support Payments If the taxpayer makes spousal or child support payments, they may be able to deduct the amounts they paid, even if their former spouse or common-law partner does not live in Canada. See CRA s guide titled Support Payments (P102) for more details. Treaty-Exempt Income The taxpayer has to report all world income that they received after they became a resident of Canada. As noted above, world income is income from all sources both inside and outside Canada. However, part or all of the foreign-source income may be exempt from Canadian tax if Canada has a tax treaty with the country in which they earned the income and there is a provision in the treaty that prevents Canada from taxing the type of income they received. They can deduct the exempt income on line 256 of their return. If you are not sure if the applicable tax treaty contains a provision that makes the foreign-source income exempt from tax in Canada, arrange with the taxpayer or site co-ordinator to contact the CRA ( ). You can refer to the CRA s Guide titled Newcomers to Canada 2014 (T4055) for a list of countries with which Canada has a tax treaty. Non-Refundable Tax Credits If the taxpayer is a newcomer to Canada during 2014, they may be limited in the amount they can claim in 2014 for certain federal non-refundable tax credits. Refer to the CRA s Guide titled Newcomers to Canada 2014 (T4055) for details. For further information concerning completing a return for new immigrants in 2014, refer to the CRA s Guide titled Newcomers to Canada 2014 (T4055) for details.

18 18 CPA ONTARIO 2015 TAX PREPARATION ASSISTANCE E. Summary of Points to Remember SENIORS Remember to: Report OAS if someone is 65 or older and not receiving OAS, ask why. Report Guaranteed Income Supplements and Spouse s Allowances they are not taxable amounts, but must be included on line 146 and deducted on line 250 (affects other calculations). Claim the age credit. Claim the pension income credit, if eligible and consider splitting eligible pension income with a spouse/common-law partner. Eligible taxpayers will be able to allocate up to half of their eligible pension income for 2014 to their spouse or common-law partner by making the election on Form T1032, Joint Election to Split Pension Income. The amount that a taxpayer transfers will be taxable as pension income to the spouse for both federal and provincial purposes. The pensioner would deduct the elected amount from line G of Form T1032 on line 210 of the tax return and the spouse would include this amount on line 116 of their tax return. Form T1032 must be signed by both spouses and filed with the pensioner s return. In addition, a copy of the signed form must be attached to the spouse s return. The information provided on the forms must be the same. The joint election would only apply for Transfer unused tax credits to spouse/common-law partner. Ask about medical expenses. Ask about disability supports expenses and disability credits if taxpayer appears eligible and is not claiming. Ask if taxpayer has purchased and used monthly (or longer) passes, electronic payment cards or weekly passes for public transit in If eligible, apply for the 2015 Ontario Senior Homeowners Property Tax Grant. If eligible, apply for the 2015 Ontario Trillium Benefit (including the Ontario Energy and Property Tax Credit). If eligible, claim the Ontario Healthy Homes Renovation Tax Credit (complete ON(S12)).

19 BRIEFING NOTES FOR 2014 TAX RETURNS 19 STUDENTS Remember to: Exclude all scholarship, fellowship or bursary income received by a full-time student with respect to a program which entitles the student to claim the education tax credit and all scholarships and bursaries received for elementary and secondary school. If not eligible for the full-time or parttime education amount, report as income on line 130 the part of the post-secondary scholarships, fellowships, and bursaries received in the year that is more than $500. Note that there are specific rules related to scholarship exemptions for post-secondary programs that consist mainly of research and for scholarships, fellowships or bursaries received in connection with a part-time program where the exemption is limited see the T1 Guide and CRA s P105 for details of the amounts that can be excluded from income. Check to see if student wants to transfer unused tuition, education, and textbook credits to a supporting person or carry the credit amount forward to be used in the future. Ask about moving expenses to/from school. If they are no longer attending school, ask if any student loan interest was paid during Apply for the 2015 Ontario Energy and Property Tax Credit for rent paid and the student residence credit, if eligible (as part of the 2015 Ontario Trillium Benefit). If the student has a child, check to see if child care expenses can be claimed by the student s spouse/common-law partner or the student themselves (refer to Form T778 for information on eligible child care expenses and how to claim the expenses). (Note: Child care expense payments may also qualify for the federal children s fitness amount tax credit or the federal children s arts amount tax credit, and the Ontario children s activity tax credit; however, if a payment would qualify to be claimed as child care expenses and for these children s credits, it must first be claimed as child care expenses. Any unused part can then be claimed for the federal and Ontario tax credits noted.) Form T778 must be completed in order to deduct child care expenses for tax purposes. Ask if student has pursued post-secondary education related to their current employment for which they paid all of the education costs they may be able to claim an education credit (see CRA s P105). Ask if student has purchased and used monthly (or longer) passes, electronic payment cards or weekly passes for public transit in 2014.

20 20 CPA ONTARIO 2015 TAX PREPARATION ASSISTANCE SINGLE PARENTS Remember to: Report all non-taxable income (e.g., social assistance) as required, as this will affect child tax benefit payments, GST/HST credits, etc. Inquire about child care expenses incurred to enable a parent to go to school/work. Child care expenses incurred by a single parent in order to attend school full-time or part-time (postsecondary or secondary) will be deductible against all types of income. Claim the amount for an eligible dependant credit for a child. Complete federal Schedule 5 wherever applicable. Claim Ontario tax reductions for dependants use Form ON428 to calculate Ontario tax. Include/deduct alimony or maintenance received/paid respectively. Determine when the individual became separated/divorced if child support is being received, as the child support may not be taxable. In the year of breakup, decide whether it is better to claim alimony/maintenance paid or the credit for spouse or dependant. Report any Universal Child Care Benefit (UCCB) amounts received reported on an RC62 slip. If the individual was a single parent on December 31, 2014, consider the option to include all UCCB amounts received in 2014 in the income of a dependant. (See line 117 of the CRA T1 Guide for details for single parents.) Ask if taxpayer has purchased and used monthly (or longer) passes, electronic payment cards or weekly passes for public transit in Claim the federal non-refundable child tax credit for children born in 1997 or later. Ask if taxpayer has any fees paid in 2014 that qualify for the federal children s fitness tax credit, the federal children s arts tax credit and/or the Ontario children s activity tax credit.