10 tax-filing myths by Tom McFeat (Source:CBC News)

This is an interesting quick read on some myths that you have probably heard from friends/colleagues in regard to taxes and Canada Revenue Agency:

We at handt accounting would be pleased to assist you mull through some of these myths, so let us know how we can help!

What is a Lien?

A lien is a legal document filed by a creditor (lender) in order to record its claim on the debtor’s (borrower’s) property. The lien is recorded at a government’s office. The lien provides a creditor with some protection or collateral until the debtor pays the creditor the amount owed.Here are three examples of liens:

1. A bank may lend a retailer $50,000 but one of the conditions is that the bank will file a lien on the retailer’s inventory. In this situation the bank’s lien results in its loan becoming secured.

2. A mortgage is a lien filed by a lender in order to secure the lender’s long-term real estate loan. The lien will require that the lender be paid the amount owed on the loan before the real estate can be transferred to another party.

3. The government may file a lien on a company’s assets until a tax obligation has been paid.

A lien on a company’s assets is to be disclosed in the company’s financial statements.

Pension income splitting

You (the pensioner) may be able to jointly elect with your spouse or common-law partner (the pension transferee) to split your eligible pension income if you meet all of the requirements.

 

Eligible pension income

What is Eligible pension income?

Eligible pension income is generally the total of the following amounts received by the pensioner in the year (these amounts also qualify for the pension income amount):

  • the taxable part of life annuity payments from a superannuation or pension fund or plan; and
  • if they are received as a result of the death of a spouse or common-law partner, or if the pensioner is 65 years of age or older at the end of the year:
    • annuity and registered retirement income fund (including life income fund) payments; and
    • Registered Retirement Savings Plan (RRSP) annuity payments.

Pension income that is not eligible

The following amounts received by the pensioner are not eligible for pension income splitting:

  • Old Age Security payments;
  • Canada Pension Plan, Quebec Pension Plan; and
  • Amounts received under a retirement compensation arrangement.

Note
Variable pension benefits paid from a money purchase provision of a Registered Pension Plan are not considered life annuity payments and do not qualify unless the pensioner is age 65 or older at the end of the year or the variable benefits are received as a result of the death of a spouse or common-law partner.

Did you know?

Public transit amount

You can claim cost of monthly public transit passes or passes of longer duration such as an annual pass for travel within Canada on public transit for 2011.

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Children’s arts tax credit

Families may be able to claim a non-refundable tax credit of up to $75 per child for eligible expenses (maximum $500) of enrolling in a prescribed program of artistic, cultural, recreational, or developmental activity.

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