Is Change

And boy, do they change things where taxes are concerned. Every year the forms and rules change so just when you think you have it figured out, you have to relearn it over again.

While this year has been fairly quiet in terms of tax changes, there are a few new items that taxpayers should be aware of.

Family Tax Cut

We’ve covered this one fairly extensively already, but some of you still have questions regarding it.

Designed for couples with minor children, it allows them to get a tax credit of up to $2,000 based on the net reduction of federal tax that would be realized if up to $50,000 of an individual’s taxable income was transferred to the individual’s eligible spouse or common-law partner. Although any couple with kids can claim the Family Tax Cut, it will most benefit those where one spouse has a much larger income than the other.

For example, Jake makes $65,000 a year; Sandra makes $25,000. Jake is taxed at a Federal marginal rate of 22 per cent, Sandra at 15 per cent. By shifting $20,000 of Jake’s income to Sandra’s tax return, all of the family’s income is now in the 15 per cent tax bracket. This reduces the amount of taxes due. Provincial taxes are not affected because this is only a federal credit.

Note that pensioners cannot split their pension and claim the Family Tax Cut at the same time, but this probably won’t affect most of you out there…

Applying for the credit within TaxTron couldn’t be easier:

  • Create a linked return for the couple (Both spouses must file their returns to get the Family Tax Cut.)
  • Report their incomes as well as information regarding their minor dependants
  • Open form S1A to bring Schedule 1A on screen
  • Check the box confirming you are claiming the Family Tax Cut

That’s it. The software will do all the calculations and send the resulting tax savings to Schedule 1 on line 423.

NETFILE

It’s always been true that NETFILE was only for the current year, and if you wanted to electronically file a previous year’s return you needed a tax professional to do so, assuming it could be done at all.

With the CRA initiative to move toward “e-services”, this is perhaps the biggest change this year. NETFILE users will be able to electronically file their previous year’s return as well as the current tax year. So not only can you file your 2014 return right now, but also the 2013 return as well.

We tell you every year to not wait until the last minute and file early. And most of you are sharp enough to do so, especially those of you reading this. But there are always some stragglers, and now fewer of them will have to resort to printing and mailing their returns than ever before.

Where’d my GST/HST credit go?

Astute readers out there will have already noticed that the Identification form is missing the customary GST/HST question. In truth, it’s been of limited value for a while.

In the past, it’s not been harmful to claim the credit in almost every case. The only real snag was with married or common-law partners both trying to claim the credit at the same time, which would result in “double-dipping”. And then there were the few people who might have qualified for the credit, but neglected to claim it for whatever reason.

Now with the 2014 return, you no longer have to manually apply for the credit. When you file your return, Canada Revenue will automatically determine if you are eligible for the credit and advise those eligible of the amount of credit that they receive. And in the case of couples, since the credit can only be claimed by one of them at the same time, it goes to whoever filed their return first.

Easy, no mistakes, and no forgetting to claim the credit.

Direct Deposit is coming…

Yes, you read that correctly. Now of course the first thing many of you are thinking is that direct deposit of payments from CRA has been around for quite a while, so what’s the news?

Well, the news is that soon it’s going to become mandatory. The days of getting that cheque in the mail are soon going to be history.

This won’t be a surprise to many of you. After all, Revenue Quebec has done this with the Solidarity Tax Credit for quite a few years now, and some of you out there may already have gotten notices in the mail from Canada Revenue advising you of the change.

Thankfully, many taxpayers have already made the switch, so they won’t be affected. For the rest, this change avoids the potential issue of cheques getting delayed or worse still, lost in the mail, or having to actually go to the bank to cash the cheque, which for many people is increasingly inconvenient in our busy lives. The money is already there waiting for you.

And in case you were concerned, setting up direct deposit does not mean CRA can see how much money you have in your account, nor can they take money out of your account.

Like we said, there aren’t a ton of new changes, but the ones that they’ve added are designed to make things smoother and easier for taxpayers just like you.

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