Does a sense of panic rush through you when you receive that brown envelope from Canada Revenue Agency (CRA) asking you for additional information, and receipts, after filing your tax return? After preparing thousands of personal tax returns over the years I feel confident in sharing the 5 frequently requested types of receipts the CRA is looking for.
1. RRSP Contributions
If one year you make a large, out of the ordinary, RRSP contribution the CRA will request to see it. Besides confirming the amount recorded on your personal tax return they will be looking at the date the contribution was made and checking to see if it was a spousal contribution.
2. Child Care Expenses
The CRA examines these to determine a number of facts. If you’re paying an individual for child care, the receipt needs to indicate the name and social insurance number of the individual supplying the care. In the past, some clients have tried to claim babysitting costs while at the gym or spa. Needles to say I didn’t allow the client to claim them on their tax returns but many do try to slide them through, with some very creative logic, and that’s what the CRA is looking for.
The above two expenses have a large impact on your personal tax returns because they directly reduce your income by 100%. For every $1.00 contributed to either, your total income is reduced by that amount to determine your net income, then taxable income.
Medical expenses and Donations and Gifts are non-refundable credits. That means they help reduce your tax payable.
3. Medical Expenses
The amount claimed in medical expenses on personal tax returns have increased dramatically over the last few years. Whether it’s due to the aging population, cut-backs on group health plans or greater awareness of eligible medical expenses, this can result in a significant tax credit. When saving your prescription receipts make sure you have the one signed by the pharmacist. A tape showing what and how you paid does not qualify. Neither does the label on the bag that the prescription came in. The CRA is looking for qualified medical expenses that fall within a 12 month period and the relationship to the individuals whose expenses are listed. Since this is a very detailed topic here is the link for more details on what is eligible and the details required if requested.
4. Donations and Gifts
If you contributed to an organization that would send a child to the circus or some other event, the receipt is not an eligible donation receipt. Yes you are donating the money for someone else’s benefit, but it does not qualify. The receipt must have the organizations charitable donation number, name, address. date of donation and who made the donation. It is the taxpayer’s responsibility to ensure the organization has a valid charitable number.
5. Property Tax and Rent Paid
This is a refundable credit, based on the amount paid and directly related to the net family income. A rent receipt must show name and address of landlord, address of tenant, number of months rent paid and total rent paid. The property tax receipt supplied from the town, city or district you lived in, showing the property owners name is required.
If you claimed expenses based on personal records but don’t have the receipts, now is the time to start requesting them, just in case.
Original receipts are required to be submitted. And make sure you scan or photocopy before sending them off. It’s not uncommon for some not to arrive on the desk of the CRA.
There is so much more to share on these topics so if you have any questions or would like me to elaborate on any item, just drop me a line and I’ll try to guide you on eligible expenses and dealing with the CRA.
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Until next time,