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| Financial |
 Seniors and
Taxes - Recognizing Their Special Tax SituationsBy Debbie Patterson - Odessey Business Services Senior citizens may not be in the upper income brackets at this point in their lives, but many seniors owe Canada Revenue Agency every year. The majority of seniors’ income comes from government payments such as CPP and OAS, as well as cashed in RRSP’s. Any income coming from the govern-ment is under taxed, if taxed at all, since they are usually paying people who reside in the lowest income bracket. EI, CPP, OAS, and any disability payments are taxed at less than 10%, unless the taxpayer requests additional tax to be taken from the payments. As little as $25 per month can make the difference between owing at the end of the year and breaking even. When applying for government benefits, such as CPP and OAS, there is a question on the form asking if the taxpayer would like extra tax taken from their cheque. This is often missed, but a separate form can be submitted any time asking for the change. The forms can be found on the Canada Revenue Agency website or call them to have the form mailed. CPP payments are determined by the contributions accumulated during the years of employment. Some seniors, who have become divorced going into retirement, may be in a situation where they get very little CPP. This is due to the fact that they were the lower wage earner for many years during their marriage. Upon divorce, the lower income earner may be entitled to divide CPP credits equally with their former spouse. This is a government-supported action and can make a large income difference for someone who would otherwise not have these CPP credits. A form is available to start this process. There may also be a situation that, financially, leaves a senior at the poverty level. OAS provides a Guaranteed Income Supplement that helps struggling seniors by increasing the OAS payment. Cashing in RRSP’s is another form of income that is under-taxed. The institutions usually take 10% unless it is from a large withdrawal. This is a shock to people in a mid-level tax bracket, where that RRSP income might put them over $32,000 of income and elevate them to the next tax level. A great deduction for seniors that may not be used to its maximum benefit is the medical expense deduction. Seniors often have large medical bills that are partially covered by Blue Cross, but they still have to pay the remaining amounts. Since the income bracket is lower, seniors can take advantage of the medical deduction, as well as qualify for a medical supplement on their taxes. Keep all medical receipts, including premium payments to providers such as Blue Cross, as these can be used to increase that deduction. Unfortunately, Alberta Health Care can NOT be used for this deduction. Debbie Patterson is the owner operator of Odessey Business Services, specializing in income tax. Visit her at www.odesseybusiness.com for more tax tips or contact her directly at 403.816.5098 |