As promised last week, here is a summary of the Tax Tweet Tips I posted last year (in many cases, expanded from the 140 character limit imposed by Twitter). I have updated these tips to assist you in preparing your 2013 personal income tax return
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1. If you sold stocks or real estate in 2013, ensure you have the original cost documents.
Note: This issue is twofold. Firstly, you should always maintain stock purchase confirmations or the annual summary to substantiate the adjusted cost base of any stock purchases. You also must maintain the original reporting letter and statement of adjustments for any real estate purchase. Secondly, many people do not keep receipts (or they may have paid cash) to substantiate cost base additions to their rental properties or cottages. Without these documents, you may have a difficult time convincing the CRA that the adjusted cost base of your real estate is higher than the original purchase price.
2. Confirm your 2013 installment payments online. Alternatively, there is a summary of the 2013 installments you paid on the back of the 2014 installment reminder the CRA just sent you.
3. Interest expense related to your investment accounts is often missed. Check the bottom left of your T5 summary for the interest you paid during the year.
4. If you sold collectibles in 2013, such as coins, stamps and china, they may not be taxable if your proceeds were <$1,000.
5. Canadian residents who are also US citizens or Green Card holders must file a 1040 US return. If you are a Canadian resident earning Rental Income in the US, you must file a 1040NR.
6. Do you own shares in any delisted, bankrupt or insolvent companies? You may be eligible to file an election to claim the capital loss this year.
7. When filing a deceased parent/grandparent’s return, ensure you report any deemed dispositions of stocks or real estate.
Note: Upon passing, if property is not transferred to a surviving spouse, the deceased taxpayer is deemed to have disposed of their capital property at death as if they actually sold the shares or real estate. The determination of the cost base of that property can often be problematic to say the least.
8. File returns in the year your child turns 18.They may be eligible for some claims at 18 and others at 19 are based on their age 18 return.
9. If you sold capital property in 2013 that was held prior to 1994, review whether you elected to bump the value in 1994.
Note: In 1994 the $100,000 capital gains exemption was eliminated. However, you were entitled to make a final election to use your capital gains exemption on stocks, real estate etc. Many people forget they made such an election and that their cost base on certain property is higher, which reduces the capital gain to be reported. This election was used extensively by people on their cottages. So if your parents sold their cottage in 2013 remind them to check if they made the election in 1994.
10. Do you pay investment counsel fees to an investment advisor? If so, they are deductible.
11. If you have a Line of Credit for investment purposes, check your December, 2013 statement for a summary of the interest you paid in 2013 & claim the interest expense that related to your investments (you may have to apportion that expense if you co-mingle your LOC with personal expenses).
12. Did you own foreign property with a cost of over $100,000 at any time during the year? If so, you must file Form T1135.
13. If you sold a US stock in 2013, use the F/X rate from the year of purchase to determine the cost and use the 2013 rate for the proceeds. You have two choices. Either use the actual F/X rate on the day of purchase and sale, or you can use the CRA's yearly average rate however, you must be consistent.
14. Did you sell a REIT in 2013? Reduce the ACB by the return of capital from prior years.
15. Last tip. Don’t file your return late no matter what! There’s a 5% penalty + another 1% per month up to 12 months. Even if you cannot afford to pay the tax due, file your return to avoid the penalties. You can usually make arrangements with the CRA to pay off your tax liability over time if you provide reasonable terms of repayment.
This is the time of the year when I’m frequently asked by readers of The Blunt Bean Counter to provide individual tax preparation services. While it is truly is an honor to receive these types of inquiries, my tax practice at Cunningham is focused on corporate tax, estate planning and financial advisory.
Unfortunately, these days, Chartered Professional Accountants only have about 3-4 weeks to complete the majority of our personal income tax returns, because most of our clients T-slips do not arrive until early April. This circumstance has forced me to narrow the scope of my tax compliance practice and I typically reserve the time I do have available to prepare personal tax returns for the owner-managers of the companies that I service. Consequently; I am unable to take on any additional personal income tax return work for non-corporate clients.
I am actively taking on new corporate clients and welcome direct company inquiries and referrals. My contact information is noted on the right-sidebar, just above the little trophy.
Tax Tips for Preparing your 2013 Return
1. If you sold stocks or real estate in 2013, ensure you have the original cost documents.
Note: This issue is twofold. Firstly, you should always maintain stock purchase confirmations or the annual summary to substantiate the adjusted cost base of any stock purchases. You also must maintain the original reporting letter and statement of adjustments for any real estate purchase. Secondly, many people do not keep receipts (or they may have paid cash) to substantiate cost base additions to their rental properties or cottages. Without these documents, you may have a difficult time convincing the CRA that the adjusted cost base of your real estate is higher than the original purchase price.
2. Confirm your 2013 installment payments online. Alternatively, there is a summary of the 2013 installments you paid on the back of the 2014 installment reminder the CRA just sent you.
3. Interest expense related to your investment accounts is often missed. Check the bottom left of your T5 summary for the interest you paid during the year.
4. If you sold collectibles in 2013, such as coins, stamps and china, they may not be taxable if your proceeds were <$1,000.
6. Do you own shares in any delisted, bankrupt or insolvent companies? You may be eligible to file an election to claim the capital loss this year.
7. When filing a deceased parent/grandparent’s return, ensure you report any deemed dispositions of stocks or real estate.
Note: Upon passing, if property is not transferred to a surviving spouse, the deceased taxpayer is deemed to have disposed of their capital property at death as if they actually sold the shares or real estate. The determination of the cost base of that property can often be problematic to say the least.
8. File returns in the year your child turns 18.They may be eligible for some claims at 18 and others at 19 are based on their age 18 return.
9. If you sold capital property in 2013 that was held prior to 1994, review whether you elected to bump the value in 1994.
Note: In 1994 the $100,000 capital gains exemption was eliminated. However, you were entitled to make a final election to use your capital gains exemption on stocks, real estate etc. Many people forget they made such an election and that their cost base on certain property is higher, which reduces the capital gain to be reported. This election was used extensively by people on their cottages. So if your parents sold their cottage in 2013 remind them to check if they made the election in 1994.
10. Do you pay investment counsel fees to an investment advisor? If so, they are deductible.
11. If you have a Line of Credit for investment purposes, check your December, 2013 statement for a summary of the interest you paid in 2013 & claim the interest expense that related to your investments (you may have to apportion that expense if you co-mingle your LOC with personal expenses).
12. Did you own foreign property with a cost of over $100,000 at any time during the year? If so, you must file Form T1135.
13. If you sold a US stock in 2013, use the F/X rate from the year of purchase to determine the cost and use the 2013 rate for the proceeds. You have two choices. Either use the actual F/X rate on the day of purchase and sale, or you can use the CRA's yearly average rate however, you must be consistent.
14. Did you sell a REIT in 2013? Reduce the ACB by the return of capital from prior years.
15. Last tip. Don’t file your return late no matter what! There’s a 5% penalty + another 1% per month up to 12 months. Even if you cannot afford to pay the tax due, file your return to avoid the penalties. You can usually make arrangements with the CRA to pay off your tax liability over time if you provide reasonable terms of repayment.
Hiring The Blunt Bean Counter
This is the time of the year when I’m frequently asked by readers of The Blunt Bean Counter to provide individual tax preparation services. While it is truly is an honor to receive these types of inquiries, my tax practice at Cunningham is focused on corporate tax, estate planning and financial advisory.
Unfortunately, these days, Chartered Professional Accountants only have about 3-4 weeks to complete the majority of our personal income tax returns, because most of our clients T-slips do not arrive until early April. This circumstance has forced me to narrow the scope of my tax compliance practice and I typically reserve the time I do have available to prepare personal tax returns for the owner-managers of the companies that I service. Consequently; I am unable to take on any additional personal income tax return work for non-corporate clients.
I am actively taking on new corporate clients and welcome direct company inquiries and referrals. My contact information is noted on the right-sidebar, just above the little trophy.
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.
