Most countries in the world impose taxes only to citizens who are residents of the said country. Once the person leaves the country and work somewhere else, he or she is automatically exempted from paying taxes or even declaring their worldwide income to that country. Continue reading →
When someone passes away, it’s unfortunately common for their estate to include some messy tax problems. Unless the individual or their family is on the ball and has been taking proper care of their taxes, they might be leaving behind quite a headache.
There are a few common scenarios where family members are left to deal with tax chaos after their loved one has passed away. Most of the time, the issue is a result of a lack of tax knowledge and can be completely avoided. Some of these tax problems exist due to:
Unpaid taxes– If someone has experienced a long illness before their death, they may have been neglecting their taxes for multiple years. The estate’s executor will be responsible for completing the required forms and making sure that the deceased’s taxes are up-to-date.
Hidden funds or assets– While it sounds like a pleasant surprise to discover that a relative had an overseas bank account you didn’t know about, you might be less than enthused to learn that they had also been neglecting to share that information with the IRS or CRA and they owe taxes on that money.
No one enjoys talking with loved ones about a time when they are no longer around, but making sure that their (and your) taxes are in order can make a considerable difference in the future.
The first step is to ensure that you and your loved ones have an accountant you trust to help you navigate your current tax situation. Your accountant should also know about your plans in case of death. He/she will be able to give you information about the taxes your loved ones will have to pay on their inheritance and will help you to understand exactly what you’re leaving behind.
The Chicago Tribune recently posted about potential tax problems with an inheritance and looked to Douglas Rothermich, vice president of wealth planning strategies at TIIAA-CRF for his perspective. “Most families don’t want to let assets blow up their kids financially or create a wedge within the family,” he said. “It’s really important that older people planning their affairs think it through ahead of time so their loved ones don’t inherit a tax mess.”
As the leaves start to fall and students start to dread the approaching school year, life gets inescapably busy. The summer always seems to fly by and when September hits, parents of post-secondary students find themselves frantically moving their kids into dorms and shelling out cash for textbooks. With all of this chaos, many people forget to keep track of some important receipts and come tax time, they lose out on some great school tax credits and tax deductions.
Post-secondary students can claim their tuition fees to receive a tuition tax credit and need either an official tax receipt or a completed form T2202A to do so. This tax credit is fairly straightforward and is commonly transferred to a student’s parents if their income isn’t very high or if the parents are the ones footing the educational bill.
Note: If there are any student loans involved, you might want to become familiar with the rules for claiming interest paid on student loans for after the schooling is finished.
Paying to take an exam or to receive a license in order to practice a certain profession or trade in Canada might be eligible for the tuition tax credit as well. There are some exceptions if you are being reimbursed by an employer, so make sure to check with your accountant before you file your tax return.
If a student has to move in order to go to school (at least 40 km closer than their previous home), they can claim their moving expenses. Unfortunately, claiming moving expenses for school isn’t exactly as helpful as it is for work. A student can only deduct their moving expenses from the money they receive as a result of attending school and would have to claim as income.
In other words, if a student receives a bursary or a research grant and has to move to another location to complete their educational commitment, they can deduct their moving expenses from that income.
Even though textbooks range in price dramatically from faculty to faculty, the CRA handles textbook tax deductions in a one-size-fits-all approach. You can claim $65 per month for full-time studies and $20 for part-time. Your accountant will use your Schedule 11 to figure out exactly how much you can claim.
Make sure to keep all of these school tax credits and deductions in mind as the weather cools and the semester starts up. You will reap the benefits at tax time!