BUSINESS Learn how changes affect your return YOU REALLY don’t want to know about the more than 2,000 changes Ottawa made recently to the Income Tax Act. But you do want to know about how some of ‘these changes affect you as you prepare to file your tax return for 1990. ‘*For example, if you forget to declare any income item more than once in a four-year period, you could be hit with a penalty of 10 per cent of the amount omit- ted,’’ said Michael Mallin, co- author of Preparing Your Income Tax Returns published by CCH at $18.95. (The new edition typically becomes a best-seller around this time each year — in 1990 it sold 70,000 copies —- which says some- thing about the complexity of our tax laws.) “So if you forgot to declare the family allowance in 1988 and this year misplace a $5,006 interest TS slip, you could end up paying a $500 penalty. ‘‘Another change: the late filing penalty has been doubled if you owe tax and miss the April 30 deadline twice in a four-year period. The second time, you will pay 10 per cent of the amount owing plus two per cent 2 month plus interest.” Mallin, a private tax consultant, said many of the technical changes merely correct past drafting er- rors. But some, like those just cited, involve otherwise unan- nounced policy changes. ! asked Mallin to highlight a few key areas of the 1990 return to help make this filing season less taxing for all of us. ® Get it toget::er. Collect all in- come information — the various “T? slips for employment in- come, pension income, investment income, family allowance and so on. Collect all deduction receipts for charitable donations, RRSP contributions, etc. Leave time to get any missing documentation. For example, if you transferred severance pay/ retiring allowance to your RRSP, you will need a T2097. If you are claiming the education amount and tuition fees — whether you awn or transferred from a depen- dent student — you will need Form T2202 or T2202A. ® Working — and driving. Your T4 slip shows your employment income. ‘“‘If you receive a non- taxable car allowance which is less Cast a whole new fight \ on your business Specializing in commercial lighting systems, alterations, additions and electrical maintenance Campbell Electrical 328-6611 Michael Grenby DOLLARS AND SENSE than the actual deductible ex- penses of using your car for your work, you can add the allowance you got to income — and then deduct all expenses,’’ Mallin said. ‘Before 1990, only commission salespeople and the clergy could do this."’ e Pension power. If you have a spouse and pension income from a former employer, consider the special $6,000 spousal RRSP con- tribution. If you are 65 or older and don’t have such pension in- come, look into creating it to claim the $1,000 pension income amount. If you have IAAC (in- come-averaging annuity contract) income, you may qualify for the $1,000 pension income amount — “despite information to the con- trary on the T4A slip,’’ Mallin said. ¢ Baby bonus. Although the mother typically receives the fami- ly allowance cheques, the parent with the higher income usually must report the income. © Interest-ing. If you bought a compounding investment (typicaliy a GIC, Canada Savings Bend, stripped bond or deferred annuity) by Dec. 31, 1989, you may declare the interest on either an annual basis or every three years. The three-year approach is usually bet- ter unless that will find you in a higher tax bracket. If you bought back past service pension, you may deduct the in- terest element of the buyback. * RRSP, old and new. The dollar limits for contributing and deducting for the 1990 tax year are unchanged (although you may no longer transfer pension income into your own RRSP). The new rules — contributions up to $11,500, the limit of 18 per cent of earned income, carrying forward unused contribution “‘room,’’ over-contributing up to $8,000 (an over-all, not annual, limit) — take effect only for the 1991 tax year. © Al in the family. The mini- mum age for claiming payments made to a related person for child care has dropped to 18 from 21. © Clawback sharpened. If your net income for 1990 is more than $50,850, you will have to pay back two-thirds of family allow- ance and OAS above that limit — up from the one-third payback in * Profitable lesson. Last July 13, Ottawa iabled amendments to the tax act so that after June 30. 1990, parents could no longer claim the tuition if their children went to a private school that of- fered post-secondary courses. ‘However, it appears that if the children have taxable income, they may sul claim tuition,” said Mallia. *‘And supporting parents or grandparents could ask Reve- nue Canada to reassess their returns to include the tuition claim for, 1989 and 1990 through June © Caring pays. Foster parents who were taxed on the social benefit payments they received may ask Revenue Canada to go back as far as 1982 to reassess their returns now that such pay- ments are not taxable. Normally, Revenue Canada goes back only three years. ‘‘This change applies to anybody who received govern- ment payments to care, in his or her home, for an unrelated per- on,’* Mallin said. Our RRSP LEAVES THE COMPETITION —— If you're looking for an RRSP, avoid the runaround. 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