Why read this?

  • › Your client is a new parent;
  • › Your client has a child come to live with her;
  • › Your client has a child and is a new Canadian resident.

What to do?

1. Apply for and report benefits

Use the RC66 Canada Child Benefits Application to apply for the Universal Child Care Benefit, the Canadian Child Tax Benefit and the Child Disability Benefit, or apply online using CRA’s My Account. Your client can also apply when she registers a birth.

  • For heterosexual couples, CRA considers the mother the primary caregiver, so she’ll receive all social benefits. However, the lower-income parent must report the income on his or her return, says Cheryl Mont, accountant at Harris and Wright LLP.
  • Gay parents can designate a primary caregiver in their application.

Read: 7 ways to help clients save tax

2. The Universal Child Care Benefit is worth $100 a month per child under six years of age, and it’s taxable income. In February, your client will receive CRA’s RC62 Universal Child Care Benefit Statement.

  • The lower-income partner reports the UCCB, says CRA. Put the amount in box 10 of the statement on line 117 of the return.

Claim expenses and credits

Tip

Your client may be able to transfer any unused amount to her partner. Complete line 326 of the return and Schedule 2, Federal Amounts Transferred from Your Spouse or Common-Law Partner to determine the amount.

1. Amount for children born in 1997 or later (line 367)

  • Claim up to $2,255 for each child under 18 at year’s end.
  • One parent claims all children, CRA says, even if they’re divorced or share custody.
    • If the child ordinarily resided with both parents (married or common-law) throughout the year, either parent may claim the credit.
    • If both parents did not live with the child throughout the year, CRA says the parent claiming eligible dependants on line 305 will make this claim. But a parent making support payments for a particular child usually can’t claim the eligible dependant credit for that same child, says Mont.
  • Enter the number of children for whom your client isn’t claiming the Family Caregiver Amount in box 366 of Schedule 1 of the return. Enter the number of children your client is claiming the credit for in box 352.
  • Enter the total credit on line 367.

Read: 8 tax tips for families

2. Childcare (line 214)

  • Claim the expenses your client or her partner paid for childcare while at work, school or doing research.
  • The child must be under 16 at some point during the year. (If he’s disabled, the age limit does not apply.)
  • Attach Form T778, Child Care Expenses Deduction to the return.
  • The lower-income partner must claim expenses, according to the Income Tax Act, unless that partner is in school, suffering a long-term illness, in prison, or was temporarily separated from his or her partner.

TIP

A single parent can elect to have all of the UCCB income taxed in one of her children’s hands, says Mont. This shelters it under the child’s basic personal exemption.

Separation, divorce and shared custody

  • If parents share custody, and the child lives with each equally, CRA may consider both as primary caregivers. Each parent will get half the benefits payment they’d be entitled to had they been taking care of the child full time.
  • If your clients are getting separated or divorced, notify CRA using form RC65 Marital Status Change. CRA sends benefits to the primary caregiver. It will re-calculate her payments when it’s notified of the change in marital status. The former secondary caregiver must apply for benefits online or using the Canada Child Benefits Application.
  • To designate a father as the primary caregiver, attach a signed note to the benefits application from the female parent stating the father is primarily responsible for the children.

3. Children’s Fitness Amount (Schedule 1, line 365) and Children’s Arts Amount (Schedule 1 line 370)

  • Your client can claim up to $500 per child in fees for sports and art programs.
  • The child must be under 16 (18 if disabled) at the beginning of the year.

4. If your client’s child is disabled, transfer the child’s unused Disability Amount to your client’s return.

  • Use line 316 of the federal worksheet to calculate the child’s transferable disability amount.
  • Then, use line 318 in the worksheet to calculate how much to transfer to your client.
  • Enter the total on line 318 of Schedule 1.

Read: Tax filing for couples

5. If your client’s child has a long-term illness, claim the Family Caregiver Amount.

  • Your client is eligible if her child is infirm, but not necessarily disabled.
  • CRA requires a signed doctor’s statement that includes:
    • when the impairment or illness began;
    • the expected duration of the impairment;
    • that the illness makes the child more dependent on personal assistance than other children of the same age.

c. To claim, add $2,058 to the amount for children born in 1997 or later (line 367).

Read more on the iPad!

More information on child-related benefits, and mistakes to avoid

Sources: Cheryl Mont, accountant at Harris and Wright LLP, and CRA.

Compiled by Jessica Bruno, content editor of Advisor Group.

Originally published in Advisor's Edge Report

Read this article and full issues on the iPad - click here.

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