Ah,
Spring. Flowers are about to bloom, the snow is about to melt, and taxes are just
about due. Tax season can add extra stress to an already intense semester for
students, but can cause a bigger headache if they are neglected. Although taxes
are intimidating, especially for students doing them for the first time, here
are some resources and tips to help people file successful tax claims.
THE
TAX WORLD
Simply
put, taxes are paid to the government so they can provide public services.
Unfortunately, there is a lot of confusion and jargon surrounding taxes, which
is what can make them such a daunting task.
“Students
get assistance in the income tax area by being allowed to claim some tax
credits and deductions,” says John Wilson, an accounting professor at Capilano
University. “A deduction means that you actually take the amount off of your
income before you determine how much tax you have to pay. A tax credit is where
you are not adjusting your income. In the end, you say, ‘Of that amount of tax
that I owe, here is a credit that goes towards paying them.’ They both end up
lowering the amount that you have to pay, but they do it in different ways. One
takes it off the tax, and the other takes it off the income.”
Many
people use outside resources, like H&R Block, Liberty Tax Service, or
personal accountants to help them file their taxes, to avoid missing any
benefits. Although these places advertise cheap rates for tax assistance, most
companies are just advertising their base rates. The rate increases based on
how complicated the return is and how many T4’s and other tax slips are needed to
complete it.
“For
a student, it would be closer to $100 for all the slips that they have to use,”
says Wilson, “And you can buy computer software that will cost about a third of
that. You have an ability on the website to file over the telephone, where you phone
someone from Revenue Canada, and they assist you over the phone.”
As
opposed to the traditional method of filing taxes on paper and sending it to
the government, more and more Canadians are filing online. According to
Statistics Canada, 3.7 million people filed their 2009 claim online, which was
up from 3.1 million in 2007.
If
filing online, there are a variety of software programs that can help you with
your claim. This is usually a less expensive option than companies that process
your taxes for you, but they can be confusing to navigate, and are not as
personal as one-on-one help.
Although
outsourcing help for taxes can be useful, it is still important to be wary of
the price you are paying for the services received. Amy Paulston, a student at
Langara College, had to do four different drafts of her income tax in 2010 because
the quote H&R Block gave her was completely different from the quote she
completed and the one her mother drafted for her.
“It
was very confusing,” she says. “The claim was much lower than the two that I
already had, and basically just made me have to re-do my taxes by hand.”
H&R
Block still charged for the services even though the quote was inaccurate,
causing more headaches than it solved. “It’s just frustrating as a student to
get my taxes done professionally and get so much conflicting information from
different sources,” says Paulston.
“What
often happens with students is that the students will do the work, and have
their tuition credits and everything, and want to get their refund as quickly as
possible,” says Wilson. “So, they’ll go to a prepare H&R Block-type
business, or something similar. The student gives them a slice of their refund.
The business prepares a return as part of the service there are offering, and
they keep a percentage of whatever their rate is – usually around 15 per cent,
which is a good chunk of the return, considering it is free to do on your own.
With a little bit of time and energy, you can do it yourself and save yourself some
money. “
The
government does provide some tax help as well: “There are organizations around
that are helping people who don’t have much income, and giving them help to
file their tax returns,” Wilson explains. “If you phone Canada Revenue Agency
they will know where to find the where the programs are. These programs are to
help seniors, students, and homeless fill in their tax returns because there
are many benefits in our society, subsidy and that, that depend on filing tax
returns.”
The
Canadian government offers assistance over the phone with Tax Information Phone
Serves (TIPS), an automated phone service for general tax information, Canada
Revenue Agency offices – where publications are available – and Volunteer
Income Tax Clinics. These clinics are free help for simple income tax returns,
focused to aid low-income citizens.
TAX
FACTS
The
deadline for filing taxes is Apr. 30, and although this doesn’t mean that
everyone pays them on time, there are benefits to making a claim by this date.
“If
there is any free money associated with filing your tax return, if you don’t
file on time you lose the chance to get that money,” Wilson says. “Some of the
tax credits are time sensitive. If you don’t file on time, there are some
credits that might expire.”
These
time-sensitive credits include ones like the B.C. Provincial tax credits, like
the PST and GST.
To
file an accurate claim, students need T4 tax slips from all of their employers.
These slips are records of the income made while being employed by that
specific company. They also show how much tax has already been paid by being
directly taken off the income. By law, employers have to send these to
employees by the end of February, giving people enough time to do taxes before
the deadline.
Students
also need to collect a T2200 tax slip, which shows how much money they paid in
tuition and for how many months there were considered a student. Capilano
students can access this through their myCap account.
TAXES
FOR STUDENTS
There
are some tax credits that are specifically for students, but sometimes
deductions and credit can be easily missed. Some of the commonly overlooked
credits include a textbook credit, moving expense deductions, scholarship and
bursary credit, tuition credit, and transportation (U-Pass) credit.
“Some
of the tax credits give you some money based on how many months you were
full-time or part-time student,” explains Wilson. “There is a basic education
tax credit, and if you’re a full-time student, it ends up being $60 a month. If
you’re a part time student, it ends up being $18 per month. There is no
particular reason of what it’s for; it’s just there to help you because they
know that you are a student. A textbook tax credit adds another $10 a month
during the period that you are getting an educational tax credit.”
Students
don’t have to keep receipts for textbooks to send into the government, because
you’re not claiming what you actually spend, just the tax credit. This makes
administration easier for the government and easier for the students, as they
don’t have to keep the receipts and the government doesn’t have to receive
them.
“If
you have a student loan debt, then the interest that you’ve paid on your
student loan becomes deductible,” Wilson continues. “There is a credit for
that. Most students won’t be having any interest while they’re going to school
because you don’t start paying the loans until you’ve finished and [are]
working full-time.”
Scholarships
and bursaries are considered part of income, but there are also certain amounts
of them that are tax-free. In effect, students claim the whole amount, but get
a deduction for the majority of it.
There
is also the ability to transfer the education tax credits to a parent or
spouse: “Often students are going to school and won’t have enough income to be
able to use up any of these credits. And yet, other people are helping them by
providing money for tuition or whatever, and so they can transfer up to $750
worth of these credits to someone else – parent, or grandparent, or whatever,”
says Wilson.
If
a student moves a significant distance to be able to go to school, then they
can also write off some of their expenses. There is a formula for calculating
the distance the student has to move to determine how many expenses they can
write off.
“It
might not be a lot,” says Wilson. “It might just be gas and travel from here to
back home, but at least there is some ability to deduct some of those costs.
Moving expenses are ones that often get misplaced.”
There
is also a tax credit for transit passes, but because the cost of the U-Pass is
included in tuition, it is often forgotten. There are two types of slips that
you have to print off from the University; one related to the U-Pass and one
related to the general tuition, both of which are available for download on
Capilano’s website, with a student account.
Taxes
can be intimidating, but with the right knowledge and tools, students can
receive a welcome refund to cushion their bank account.
The
Canada Revenue Agency has a website and a pamphlet that provides specific
information about taxes, that can be found at www.cra-arc.gc.ca.
//Leah Scheitel, writer
//Graphics by Jillian Aquino
//Leah Scheitel, writer
//Graphics by Jillian Aquino
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