scroll down to content
[H&R Block Insight - August 2009]
[Guidelines for frequent flyer miles clarified]

It seems like every credit card available today has some kind of fringe benefit. Whether it is frequent flyer points, points towards purchases or cash back, a credit card is no longer just a way to defer payment.

Many employees collect frequent flyer miles while travelling on company business and in turn, cash in their points for vacations or other personal rewards. In the eyes of Canada Revenue Agency (CRA), employees were supposed to calculate the resulting benefit of their frequent flyer points and include it as income on their personal tax return.

Recognizing the practical problems involved with calculating the benefit, the CRA has now introduced new guidelines around claiming frequent flyer miles on their tax return.

Now you do not have to report it on your tax return if:

  • The points are not converted to cash
  • The plan or arrangement is not an alternate form of compensation as part of your job
  • The plan or arrangement is not designed to avoid paying tax

For most employees, this will exempt them from claiming their air miles rewards on their personal return.

The new rules only apply when the employee controls the points. If the points are controlled by an employer, they must continue to report the fair market value of any benefits received by the employee on their T4 slip when the points are redeemed.

 

[Find your calling in taxes]

It was a simple plan. Ewa Kolinska had not filed a personal tax return since 1995 but received an assessment from the Canada Revenue Agency based on previous returns. The assessment said she owed a considerable amount and she needed to get everything straightened out.

She went to an H&R Block office and told the tax professional she needed to ask some questions on behalf of her sister. She figured it would be easier than admitting it was really her problem.

"I didn't want to admit that I hadn't filed my returns in such a long time and that I now needed to deal with this outstanding balance that was causing me so many headaches," explains Kolinska. "My background is in process management so it is not my nature to not get things done.

Once in a private office, the plan quickly fell apart and Kolinska confessed it was really her taxes she was asking about.

"In about five minutes, the tax professional had changed my perspective 180 degrees - it went from being very stressful to very manageable," says Kolinska. "She put together an action plan on how to deal with filing the last 10 years of my returns."

The tax professional also encouraged Kolinska to enrol in the H&R Block Tax Training School so she could catch up on her returns herself. And so she could learn how to do her returns in the future. She took the course and enjoyed it so much, she applied to be a tax professional after successfully graduating from the program. Now she is providing advice to clients who have multi-year returns to file.

"I wasn't planning on becoming a tax associate but now I am helping people who were like me," she says. "I know the stress of unfiled returns so I can completely relate."

Kolinska is almost finished filing her 14 years of old tax returns. She is also planning to hold seminars during tax season to help people understand how to organize their receipts or how to approach the CRA if you do owe taxes from previous years.

"When you have lived through the CRA putting your account into collections and calling your current employer about it, you can really relate to people having the same kinds of issues," she explains. "You can't ignore your taxes - you need to be proactive and take charge of getting caught up."

For information on the H&R Block Tax Training School, click here or visit www.hrblock.ca

 

[Moving to a new pasture?]

Even with the heat, moving in the summer makes sense for a lot of people. It is a chance for families to move to a new house before the school year starts. Or if you are moving across the country, it is a chance to drive without worrying about snowstorms.

If your move is to relocate to start a new job or a new position with the same employer, you may be able to deduct some of your moving costs from your taxable income.

In order for moving expenses to be deductible, your new residence must be at least 40 kilometres closer to your new place of employment. However, if your employer pays for some of your moving expenses, you cannot claim those expenses.

Moving expenses are deductible only from a taxpayer's net earnings at the new location. So if you move later in the year, and only earn a few weeks of income at your new job then you may find your deductions are limited. However, eligible moving expenses that cannot be deducted in the year of the move may be carried forward and claimed against net earnings from the new location in a subsequent year.

Deductible Moving Expenses

Moving expenses are one of the most reviewed and re-assessed tax deductions so it is important to understand if you qualify and what you can actually claim.

Deductible moving expenses are those listed in the Income Tax Act, and are limited to the following:

  • the cost of moving household effects, including packing, hauling, in-transit storage, and insurance costs;
  • transportation costs to the new residence for the taxpayer and his or her family including amounts for travel, meals, and lodging en route;
  • the cost of temporary lodging and meals for up to 15 days near the former residence and/or the new residence;
  • the cost of canceling a lease for the old residence, not including any rent paid while the taxpayer lived there;
  • the cost of changing addresses on legal documents, replacing automobile permits and licenses, and utility hook-ups and disconnections;
  • up to $5,000 of the amount incurred for interest, property taxes, insurance premiums, heating and utilities required to maintain the former residence after the move, provided it was not being rented or lived in by a household member and reasonable efforts were made to sell it;
  • selling costs of the old residence, including real estate commissions, legal or notarial fees, advertising, and mortgage penalty if a mortgage is paid off before maturity; and
  • legal fees connected with buying a new home and any taxes paid to register or transfer title to the new residence, but only if the taxpayer or his or her spouse sold the old residence as a result of the move. This deduction is not available to taxpayers acquiring a first residence. "Taxes paid to register or transfer title" do not include the GST/ HST payable on newly built residences.

Non-Deductible Moving Expenses

The items listed below are not deductible as moving expenses:

  • pre-move expenses from the old location to the new location for job-hunting, house-hunting, or any other purpose;
  • expenses incurred to make the former residence more saleable; and
  • any loss on the sale of the old residence.

 

[Letter to the Editor]

Hello

My father was recently approved for the Disability Tax Credit and was back dated a couple of years.

He is separated and living in a seniors complex. I am his daughter (only child) and caretaker and have Power of Attorney.

Can I claim the caretaker credit or something similar? He doesn't live with me, but I am taking care of his banking, taxes, buying groceries, taking him to doctor's appointments, etc.

Can his unused Disability Tax Credit be transferred to me? If so how do I find out what his unused portion would be for previous years?

Thank you,
Darcie M.

Darcie,

This is a great question - thank you for sending it in. The answers rely on how the Tax Act defines dependants and support.

The Caregiver Tax Credit specifically stipulates that you and your dependant must live under the same roof. Since your father is in a separate home, you are not eligible to claim this credit.

The Disability Tax Credit does allow the unused portion to be transferred to a family member that provides support. Power of Attorney gives you the ability to conduct business on your father's behalf but this is not considered support for tax purposes.

Support is not defined in the Income Tax Act, but is ordinarily taken to mean the provision of food, lodging, clothing, medical and dental care. If you are funding these needs for you father then you would be entitled to claim the unused portion of the Disability Tax Credit.

Contact the Canada Revenue Agency and ask them to provide you with the unused Disability Credit amounts or ask a tax professional to calculate the amount from your father's previous tax returns.