Still doing tax returns for my adult children & their spouses

Every year I ask myself, should I continue to offer to do tax returns for my adult children and their spouses? All of them have university degrees and are smart enough to file their own tax returns. My daughter was willing to do it one year using tax preparation software with only a little help from me.

Part of my problem is Canadians are not even aware of how much tax they pay. Plus we keep voting for governments that buy votes using our tax dollars. The average Canadian family will pay 42.9% of their income in taxes imposed by all three levels of government in 2016. (Federal, provincial and local) Tax freedom day was June 7, 2016 if Canadians paid their total tax bill up front. Our U.S. neighbours tax freedom day was April 24th and they will only pay 31% of their income in taxes.

There are a number of reasons why I continue to offer to do tax returns for the whole family. Having worked as a financial advisor, tax planning is a key element when putting a financial plan together. My tax knowledge and skill comes from working many years with accountants and tax lawyers ensuring that my whole family pays the least amount of tax.

Plus, the Canadian tax system is very complicated and is constantly changing with every federal and provincial budget. For example: many tax credits that were given by the Conservative government have been taken away completely by a new Liberal government.

For the 2015 tax year, the Liberals cancelled income splitting for families, a maximum tax credit of $2,000 for transferring up to $50,000 of income to a spouse with a lower income if they had a child under 18 years of age.

Some changes for 2017 include the elimination of the following credits:

  1. Education and textbooks credit
  2. Children’s fitness credit
  3. Children’s arts credit
  4. Public transit tax credit

Now, most retired Canadian seniors who don’t have a pension from their former employer are not even aware of a $2,000 pension credit. It requires opening a RRIF account, transferring $2,000 from their RRSP and then taking it out. They don’t have to wait until they reach the age of 71 in order to open a RRIF account. Plus, RRIF income can be split with your spouse if both of you are 65 years of age which could potentially add up to $4,000 of income tax free per year.

The Federal Liberal government will introduce a new budget on March 22 and there are rumors of more tax increases. Three things that Canadians should worry about;

  1. Higher capital gains inclusion rate from 50% to 75%
  2. Reducing the dividend tax credit
  3. Taxing your principal residency 

I will end this post with two well known proverbs. ” In this world nothing can be said to be certain, except death and taxes.” & “A penny saved is a penny earned.”

 

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8 thoughts on “Still doing tax returns for my adult children & their spouses

  1. I have always used TurboTax but often wonder how knowledgeable it truly is. Not being an accountant or financial planner, I have always figured that it is at least as good as I would be for finding proper credits and deductions. They do have an audit guarantee so I am happy with the time and aggravation it saves me.

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  2. The tax that Canadians pay does seem high, but as a US citizen, I would gladly pay it if we could have universal health care for everyone. People would not bankrupt themselves because of medical expenses. 600,000 Americans file bankruptcy every year because of medical costs. On average, Americans pay 10% of their income for medical insurance and co-pays ( in addition to our taxes). From my point of view, Canadians have it really good in a lot of ways. Your culture and your country is great in many ways, a little higher taxes is a small price to pay. That being said, I hate paying taxes too.

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    • Yes, I really prefer our tax system that pays for our universal health care for everyone. However, we still have governments that waste our tax dollars. For example, I don’t like is paying taxes for green electrical energy that costs 10 times more than electricity produced from gas fired plants. I don’t like the new carbon tax on gasoline, natural gas and propane. Switching to electric heating is so much more expensive than either natural gas or propane if you live in rural areas.

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      • Yes, I agree that every government wastes money. I like green energy in theory; getting there in reality has some challenges for sure. I also live in a rural area and do have propane for our house. I hope that things get better for you too.

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  3. To some people, taxes are a scary subject so they fail to learn or teach themselves anything about it. It is easier to pay someone to do it for them. They don’t understand that by having a slight knowledge in the subject matter, it can actually benefit your financial well being. I have probably been doing my own taxes since about age 18 or 19 and learn something new every year. Not only do I save money by doing it myself, I gain knowledge by doing it, and always find new and exciting ways to get more tax credits/ deductions to keep my own money in my pockets where it belongs.

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    • I agree, sometimes delaying taking a profit on investments can boost your after tax return or taking a loss but re-buying the same investment to save tax money is also useful. Buy and hold forever could sometimes allow government to benefit more than necessary.

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