Business

Banka: Some accounting things to look forward to in 2012

Welcome to 2012 which is a leap year so that will have an effect on some tax issues.

For example, if you are required to file a trust return (usually 90 days after the end of the year); it will be due on March 30, 2012, instead of March 31.

Also the RRSP contribution deadline is Feb. 29, 2012, this year instead of March 1, 2012.

Although basic cosmetic procedures are not deductible, there are some exceptions such as endovenous laser therapy for varicose veins and compression stockings and treatment of severe acne that was disfiguring.

Farming operations may be eligible for the scientific research and experimental development credit if farming activities involve the development or improvement of products and processes.

Some activities that might qualify are plant breeding and seed industry, greenhouses and farming, equipment modification or better environmental practices.

Draft legislative proposals were approved by the Canada Revenue Agency for a new pension plan called Pooled Registered Pension Plans.

These are a low cost defined contribution pension plan available to employers, employees and self-employed individuals that will be managed by a PRPP administrator and investments in the plan do not need to be ‘qualified investments.’

All contributions will be deductible for tax purposes but limited to the RRSP contribution limit for the year.

Once again, CRA will be conducting its letter campaign. There will be two types of letters sent to taxpayers across the country.

The first letter will explain to tax payers the eligibility criteria for certain deductions that they have claimed on their recent tax return and will include a T1 Adjustment form should the tax payer decide that they may wish to amend their taxes.

The second letter will contain the same information, but will also inform the tax payer that their return may be selected for audit.

Taxpayers who have rental income, business income, employment expenses or capital gains and losses from dispositions of publicly traded shares or mutual fund units will be targeted.

The goal of the letter campaign is to educate the public and to promote compliance with the income tax act.

Results published from the 2010 letter campaign indicated that the first letter caused four per cent of all tax payers to make a change to their returns while the second letter caused eight per cent to make a change.

The CPP changes came into effect this month which are that all employed individuals aged 60 to 65 will be required to make CPP contributions even if the individual is receiving the CPP pension.

Employed individuals aged 66 to 70 years of age who are receiving the CPP pension will be required to contribute to CPP unless they elect to stop their CPP contributions. They must fill in form CPT30 sending the original to the CRA and a copy to their employer.

The election will take effect on the first of the month on which the employer receives the form.

Self employed individuals will need to complete schedule 8 of their income tax return. Employees cannot contribute to CPP after the month that they turn 70.

The changes to the 2011 taxes are:

• Volunteer firefighters may be able to claim an amount of $3,000.

• Parents may be able to claim a Children’s Arts Tax Credit for registration or membership of your child in a prescribed program of artistic, cultural, recreational or developmental activity. Your child must be under the age of 16 (18 if disabled) and the maximum expenditure would be $500 which would result in a tax credit of $75. To be an eligible program it must be at least eight consecutive weeks where 90 per cent of activities are eligible or five consecutive days where more than 50 per cent of activities are eligible. If the program is part of the school curriculum, it will not be eligible. Receipts must be provided by the organization offering the program.

• The maximum limit of $10,000 per eligible dependent for medical expenses has been removed.

• The mineral exploration tax credit has been extended yet another year for agreements entered into before April 1, 2012.

• There have been changes to the examination fees that will qualify for the tuition amount and courses taken at a university outside of Canada will qualify for the tuition tax credit as long as it is at least three consecutive weeks.

Gabriele Banka is a CGA and the owner of Banka & Company Inc. .

 

info@bankaco.com

 

 

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