Good to be a student

Tips from CRA:

That as a student, you may be able to claim a tax credit for the tuition fees you paid for post-secondary level courses you attended during the year? You may also be able to claim an education amount of $400 as a full-time student and $120 as a part-time student for each whole or part month you were enrolled in a qualifying program. In addition, you may be able to claim the non-refundable textbook credit to help with the cost of your textbooks.

You may also be eligible to claim moving expenses, child care expenses, and a tax credit for interest paid on your student loans, as well as the non-refundable tax credit for public transit passes.

Remember, a professional accountant can help you with this and other tax issues you may encounter. Just give us a call or email us at tax@yyconsulting.com. As a student, you may be eligible for $10 off our regular fee.

Tax Tips from CRA

Take it to the limit!

Did you know…

That February 29, 2008, is the deadline for making a contribution to a registered retirement savings plan (RRSP) for the 2007 tax year? With RRSPs, you can start saving now for your retirement, education, or the purchase of a home.

Beginning in 2007, RRSP must mature before the end of the year in which the annuitant turns 71 years of age (previously 69 years of age). Similarly, registered pension plans and deferred profit sharing plans will generally be required to commence the payment of benefits to members by the end of the year in which the members turn 71 years of age.

Reduce Tax By Donation

Do you know...

That you may be able to reduce your income tax by donating to a registered charity? You can verify whether a charity is registered by searching for it in the CRA Charities Listings.

In 2006, the first $200 you donate is eligible for a federal tax credit of 15.25% of the donation amount. After the first $200 of charitable donations, the federal tax credit increases to 29% of the amount donated over $200. You may also be eligible for provincial or territorial tax credits based on the applicable provincial or territorial rates.

You do not have to claim all of the donations you made this year on your current-year return. You can carry forward any donations you do not claim in the current year and claim them on your return for any of the next five years. Married couples or common-law partners can pool their donations and claim them on one return.

Please talk to your accountant if you need help on your income tax return.

Foreign currency tax tips

Both businesses and individual taxpayers may find themselves in situations where foreign currency transactions are required to be converted into Canadian dollars. This may be an almost daily occurrence for businesses involved in cross-border work. Individual taxpayers may have to take into account foreign currency rates on such diverse situations as the calculation of a gain or loss on an investment or the receipt of regular payments, such as pensions, from a foreign country.

You need not use the Bank of Canada rate in determining the conversion rates. There is both a current and historic converter from scores of other currencies to Canadian dollars at http://www.bankofcanada.ca/en/ rates/converter.html.

There is nothing in the Income Tax Act or the CRA's published material that requires you to use the Bank of Canada annual average exchange rate to convert your pension and investment income to Canadian dollars.


Page 14 of the 2006 General Income Tax and Benefit Guide indicates that you may use the exchange rate that was in effect on the day you received the foreign income. Interpretation Bulletin IT-270R3, Foreign Tax Credit, also indicates that investment income may be converted at the exchange rate that applied on the date it was received. Pension income may also be converted at that exchange rate.

However, if the amounts were paid at various times throughout the year, you may use the Bank of Canada annual average exchange rate as a convenience.

Of course, as we have pointed out in the past, there is nothing to stop one from trying each rate on for size and only after determining what produces the best result, making a choice. In the worst-case scenario, all that can happen is that you might be called upon to justify that decision.

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On a different aspect of foreign exchange, we have been finding more foreign hotels have been asking us, when we tender our credit card, whether we would like to pay in local currency or Canadian dollars. This generally is a huge trap for the unwary.

In August in London, our hotel would have converted the bill to Canadian dollars at a rate of $2.40 to the pound. We insisted in paying in pounds sterling and the subsequent VISA statement showed the conversion by our bank at $2.19!

An offer of the convenience of having your credit card debited based on Canadian dollars is just one more way hotels can rip off unwary travellers.

Copied from: Arthur Drache, Financial Post

The Role of Appeals in Resolving Federal Tax Disputes

Internal Revenue Service (IRS) provides a formal process – Appeals – to help resolve tax disputes without proceeding to court. Appeals officials will review all available information, viewpoints and perspectives to come to a resolution on which the IRS and the taxpayer agree.

Q. I disagree with the action the IRS is taking on my case. If I go to Appeals, will I really get a fair review?

A. Yes, you will. The Appeals Division of the IRS is designed as an independent forum that provides a fresh look at your tax dispute.

Q. Are there any advantages to going to Appeals, or is it better to just go to court?

A. The Appeals Division is charged with reviewing your case in a way that is impartial and fair. And, unlike a judge, the Appeals Division has a more flexible viewpoint and can offer compromises instead of simply ruling on the point of law. Appeals can recognize that there are gray areas.

Q. I have a case currently in Appeals, but I think that the Appeals official has been communicating with the IRS’ examination division behind my back. Is that allowed? What can I do?

A. By law, Appeals cannot conduct “ex parte communication,” or communication with other parts of the IRS about your Appeals case, without your knowledge. The ex parte rule is intended to help maintain the integrity of the Appeals process. If you believe that the ex parte rule has been violated, you need to bring it to the attention of the Appeals officer’s supervisor. If ex parte communication has occurred, you will receive complete information on the communication that took place, and your case may be reassigned.

Q. If I take my case to court, can I change my mind and go to Appeals instead?

A. No. Once your case is in the courts, Appeals cannot help you. In most instances, you should exhaust all of your other options before proceeding with a court case.

Q. Is the standard Appeals process my only option for resolution of my dispute, other than court?

A. Other than the standard Appeals process, other options for dispute resolution are available. These include fast-track settlements, post-appeals mediation and arbitration.

Q. What are my options for authorizing other people to represent me with the IRS?

A. There is a wide range of third-party authorizations available to help you with representation in all sorts of federal tax issues. To highlight just a few of these options, you can authorize your tax practitioner in writing using the Power of Attorney, Tax Information Authorization or Third-Party Designation, or via telephone using the Oral Tax Information Authorization or Oral Disclosure Consent. Each authorization has its own unique requirements and limitations, and several publications are available for more complete information. Check out the IRS Web site at www.IRS.gov for details, or talk to your tax practitioner.

Remember, an accounting professional can help you with this and other tax issues you may encounter. Just email us at tax@yyconsulting.com.

IRS Warns Taxpayers of New E-mail Scams

Updated Aug. 24, 2007 — The Internal Revenue Service today warned taxpayers of a new phishing scam, in which an e-mail purporting to come from the IRS advises taxpayers they can receive $80 by filling out an online customer satisfaction survey. The IRS urges taxpayers to ignore this solicitation and not provide any requested information. The IRS does not initiate contact with taxpayers through e-mail.

Updated June 19, 2007 — In another recent scam, consumers have received a "Tax Avoidance Investigation" e-mail claiming to come from the IRS' "Fraud Department" in which the recipient is asked to complete an "investigation form," for which there is a link contained in the e-mail, because of possible fraud that the recipient committed. It is believed that clicking on the link may activate a Trojan Horse.

IR-2007-109, May 31, 2007

WASHINGTON — The Internal Revenue Service today alerted taxpayers to the latest versions of an e-mail scam intended to fool people into believing they are under investigation by the agency’s Criminal Investigation division.

The e-mail purporting to be from IRS Criminal Investigation falsely states that the person is under a criminal probe for submitting a false tax return to the California Franchise Tax Board. The e-mail seeks to entice people to click on a link or open an attachment to learn more information about the complaint against them. The IRS warned people that the e-mail link and attachment is a Trojan Horse that can take over the person’s computer hard drive and allow someone to have remote access to the computer.

The IRS urged people not to click the link in the e-mail or open the attachment.
Similar e-mail variations suggest a customer has filed a complaint against a company and the IRS can act as an arbitrator. The latest versions appear aimed at business taxpayers as well as individual taxpayers.

The IRS does not send out unsolicited e-mails or ask for detailed personal and financial information. Additionally, the IRS never asks people for the PIN numbers, passwords or similar secret access information for their credit card, bank or other financial accounts.

Alien Stories

Ever wondering about why you are being called alien in American tax system? It took me years to get used to the "alien" term. If I ever called you "alien", blame IRS for the brainwashing.

I personally went through the morphogenesis the moment I boarded the plane to the USA. Years have passed, I studied, worked and lived in US as an alien: first as a foreign student entitled all sort of rules and special treatments, then a non-resident alien, a resident alien and finally a dual-status alien!

Borrowed from IRS, here are some essential concepts that you should understand:

Resident Aliens

A resident alien's income is generally subject to tax in the same manner as a U.S. citizen. If you are a resident alien, you must report all interest, dividends, wages, or other compensation for services, income from rental property or royalties, and other types of income on your U.S. tax return. You must report these amounts whether from sources within or outside the United States.

Nonresident Aliens

A nonresident alien usually is subject to U.S. income tax only on U.S. source income. Under limited circumstances, certain foreign source income is subject to U.S. tax.

Dual-Status Aliens

You are a dual status alien when you have been both a resident alien and a nonresident alien in the same tax year.

Source of Income

A nonresident alien (NRA) usually is subject to U.S. income tax only on U.S. source income. Similar rules exist with respect to the source of income for withholding purposes

Income Types

In general, all income of a nonresident alien is Fixed, Determinable, Annual, Periodical (FDAP) income. However, certain kinds of FDAP income are considered to be effectively connected with a U.S. trade or business. These two types of income are taxed in different ways.
Reporting your Income in U.S. Currency

You must express the amounts you report on your U.S. tax return in U.S. dollars. If you receive all or part of your income, or pay some or all of your expenses in foreign currency, you must translate the foreign currency into U.S. dollars.
Tax Withholding on Foreign Persons

Payments of income to foreign persons are subject to special withholding rules. In particular, foreign athletes and entertainers are subject to substantial withholding on their U.S. source gross income. This withholding can be reduced by entering into a Central Withholding Agreement with the Internal Revenue Service.
Foreign Students and Scholars

Special rules apply to the taxation of foreign students and scholars which do not apply to other kinds of aliens.
Taxpayer Identification Numbers (TIN)

Anyone (including aliens) who files a U.S. federal tax return must have a Taxpayer Identification Number (TIN). In addition, aliens who request tax treaty exemptions or other exemptions from withholding must also have a TIN.
Tax Treaties

The U.S. tax liability of aliens is determined primarily by the provisions of the U.S. Internal Revenue Code. However, the United States has entered into certain agreements known as tax treaties with several foreign countries which oftentimes override or modify the provisions of the Internal Revenue Code.

If you need help on determining your taxation status in US, please contact a professional accountant.

Keeping Good Tax Records

In a tax emergency, would you be ready? Well–organized records not only help you prepare your tax return. They also help you answer questions if your return is selected for examination or prepare a response if you are billed for additional tax.

Fortunately, you don’t have to keep all tax records around forever. There are laws known as statutes of limitations that impact how long you must keep receipts, canceled checks, and other documents that support an item of income or a deduction on your return.

Generally, for questioning the amount of tax you reported or making an assessment of additional tax, the IRS has 3 years from the date you filed the return. For filing a claim for credit or refund, you generally have 3 years from the date the original return was filed, or 2 years from the date the tax was paid, whichever is later. For either purpose, returns filed before the due date are treated as filed on the due date. There is no statute of limitations when a return is fraudulent or when no return is filed.

You should keep some records indefinitely, such as property records. You may need them to prove the amount of gain or loss if the property is sold.

Generally, income tax returns should be kept for 3 years from the date the return was filed. They could help you prepare future tax returns or amend a return.

For more information on recordkeeping requirements for individuals, order Publication 552, Recordkeeping for Individuals.

If you are an employer, you must keep all your employment tax records for at least 4 years after the tax becomes due or is paid, whichever is later.

If you are in business, there is no particular method of bookkeeping you must use. However, you must clearly and accurately show your gross income and expenses. The records should substantiate both your income and expenses.

Publication 583, Starting a Business and Keeping Records, and Publication 463, Travel, Entertainment, Gift, and Car Expenses, provide additional information on required documentation for taxpayers with business expenses. The publications are available at IRS.gov or by calling 800-TAX-FORM (800-829-3676).