My name is Mark Goodfield. Welcome to The Blunt Bean Counter ™, a blog that shares my thoughts on income taxes, finance and the psychology of money. I am a Chartered Professional Accountant and a partner with a National Accounting Firm in Toronto. This blog is meant for everyone, but in particular for high net worth individuals and owners of private corporations. The views and opinions expressed in this blog are written solely in my personal capacity and cannot be attributed to the accounting firm with which I am affiliated. My posts are blunt, opinionated and even have a twist of humor/sarcasm. You've been warned.

Wednesday, March 16, 2011

Filing Income Tax Returns For Your Children and University Students

Michael James recently posted an excellent blog on why parents should file income tax returns for their children (or better yet, have their children actually try and file their own returns). The blog mentions several good reasons for filing and I suggest you read that particular blog. If you do not read Michael's blog, I recommend you do so. Michael digs down deep for practical tips and it feels like he has exeprienced first hand almost everything he writes about.

I agree wholeheartedly with the reasons Michael sets forth for filing a return for your child, or more specifically, your university aged child. However, as an accountant, it is always $signs that matter and I wish to add a couple other reasons for filing (Michael, thanks for the permission) that will result in cash in yours or your child's pocket, especially for children 19 years of age and older.

The Goods and Services Tax/Harmonized Sales Tax credit will pay $250 to low income earners 19 years of age and older. The credit is generated by the filing of a tax return and should be filed by those 18 years of age or older (file when you are 18, so the credit will be received when you are 19). For dependants under 19, the parents may benefit by the credit and their child filing a tax return. For those inclined, the following worksheet  will allow you to calculate your entitlement to the credit.

In addition to the Goods and Service Tax/Harmonized Sales Tax credit, in Ontario there is a $260 Ontario sales tax credit. The eligibility rules for the Ontario Sales Tax Credit are the same as those for the GST/HST Tax credit.I have not delved into the credits allowed in the other provinces, but there are definitely credits available in other provinces.

Finally, again in Ontario, there is an Ontario Energy and Property Tax Credit  where your child is over 18 and has paid rent in Ontario (sorry Ontario students attending UBC, McGill etc.). There is also a small $25 student residence credit  that makes you wonder why Ontario even provides such.

To reiterate one of Michael's points; tuition, education and textbook credits that cannot be transferred to a parent or grandparent, will be available to reduce future income tax on future earnings, most likely in the year your child becomes employed full-time, so ensure your children files to establish these credit carryforwards.

Today’s Music

I have always had this romantic notion, misguided or not, that if I was born ten years earlier, my life would have been more interesting as I would have experienced the social change and music associated with the late 1960's, instead of the banality and disco's of the early 1980's. So I recently purchased The Road to Woodstock, written by the promoter of Woodstock, Michael Lang, to get the inside scoop on the famed festival.

The book was a nice, light, entertaining read for any lovers of 60’s and early 70’s music with some interesting stories and anecdotes by rock and roll legends.

The cultural significance of Woodstock has been debated over the years, but I would suggest the significance of music to the youth of the day can't be debated. That is what I find sad today; the number of teenage kids who listen to 60’s and 70’s music is huge. Where is the music they identify with? Yes, rap seems to have an audience, but it appears limited. Maybe the issue is that life in North America has generally been fairly good and the need for rebellion through music has not been required. Alternatively, maybe most of today’s music just sucks. J

The blogs posted on The Blunt Bean Counter provide information of a general nature. These posts should not be considered specific advice; as each reader's personal financial situation is unique and fact specific. Please contact a professional advisor prior to implementing or acting upon any of the information contained in one of the blogs.

5 comments:

  1. Hi Mark,

    You make some excellent points that I missed. People are often amazed that it's possible to in effect pay a negative amount of income tax. Free money should be a good incentive for young people to learn to file a return.

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  2. Thx Michael, unfortunately as you note, many people, especially young people leave the "free money" on the table that they could certainly use; even if for University students the money is just used to pay for their weekly "kegger". :)

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  3. Simple questions for RRSP.
    Currently situation: mortatage pay off, TFSA:30K
    RRSP: wife 90K, myself: 75K. non-RRSP: 30K. 1 kid only. Home value: 500K.
    my wife and I plan retirement around 55 years old(10 years remain).
    At that time each of us have around 200K RRSP(estimate).
    we take 20k/each every year then put 5K to TFSA.
    we think 30K is enough for us.
    At 65, we can claim Max.GIS,and enjoy all benefit, for example, property tax cut 50%.
    How you think?

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  4. Hi Anon

    I cannot and will not provide specific advice on this blog, since if we met in person I may find other details, issues and concerns to take into account that could change my answer.

    That being said, you seem to be ignoring the income tax on the $20,000 RRSP withdrawls you and your wife contemplate each year if I understand you correctly. In addition, I would review your living expenses, $30k seems to be cutting it pretty tight, but again I dont know how and where you live.

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  5. Thanks to share this nice information.

    ReplyDelete