Tax Time, Again

By Fin MacDonald

As you turn your attention to preparing your 2011 Income Tax Return let's look at some of the issues before and after you file. Using my lens of 'Helping You Keep More of Your Money', I'll add a second one: Reducing the Hassle of dealing with the Tax Department.

Tax Slips

You should now have received all of the tax slips. The two exceptions are T3 Trust and T5013 Partnership units. With the proliferation of mutual funds many people will be waiting for their T3 slips.  They, and the T5013 are due by the end of March.

If you haven't received your slips from employers, contact them. If your T5 from the Bank or Credit Union hasn't arrived it may be because there is no requirement to issue one: Interest of less than $50.00 does NOT need a T5 slip. You still need to report the interest on your tax return however.

If you are unable to get your slips from the issuer you may want to contact the Canada Revenue Agency. They have extended hours until April 30th: 815 AM to 9 PM Monday to Friday and 9 AM to 5 PM Saturday. (Closed Easter Weekend). The CRA's phone number is 1-800-959-8281; once you hear the messages, press * (Star) to reach a human.

Slip issuers are required to send a copy to the CRA. If they have done this electronically then the possibility that you can obtain this information before the April 30 tax deadline increases. For example, the CRA now has all the CPP and OAS slips on file.

The CRA agent will want to satisfy her (him) self that you are who you say you are. You will need information from your previous year's tax return such as your Net Income (line 236), Refund or Balance Owing (line 485 or 484). Having your 2010 Tax Return and Notice of Assessment handy while calling will make the process of talking to the CRA less trying.

If you are unable to obtain a slip before April 30, make an estimate based on your records - Don't delay filing your tax return.

Receipts

With most people electronically filing it is still important to keep your receipts. You are required to keep receipts for 6 years. The CRA will receive many of the RRSP and Tuition receipts electronically from the issuers; but not charitable, medical, support, Child Fitness or Arts, public transit or moving, carrying charges or other deductions.

The CRA runs two review programs: Pre-Assessment and Post-Assessment Reviews. These Reviews are NOT audits - they are requests for information only. This is when they will ask for your receipts. For example, you bought eyeglasses and had major dental work done in 2011 but had no medical expense claim in previous years. If you are claiming a refund it is likely that the CRA will do a Pre-Assessment Review before they issue the refund. If the medical (or other) expenses only reduce the amount you owe it is likely that any Review will be of the Post-Assessment variety.

A word about receipts for prescription drugs issued by pharmacies. Often the pharmacy will issue a receipt that gives the annual amount that the patient has paid. If the CRA asks to see the medical receipts, this will NOT be sufficient. What will be required is the detailed, prescription by prescription, day by day record of the prescriptions paid for. As these can run to 5 to 10 or more pages it is understandable why the pharmacy would issue the summary first; they will issue the detailed report on request.

Next month I will look at common deductions (these reduce your net income) such as RRSPs, carrying charges and Pension Splitting; and common non-refundable tax credits (which reduce the amount of tax you owe) such as spousal, dependant, tuition, medical and charitable.