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February 13, 2018

February 11, 2016

Hurricane Katrina – How To Use Your Business Loss To Get A Refund on 2004 Taxes

Filed under: Tax — Tags: , , , , , , — admin @ 12:46 pm

With the massive losses caused by Katrina, the economy of the
Gulf Coast region is in extremely bad shape. Fortunately, there
is a quirk in the tax code that can help you generate a large
refund from your 2004 taxes.

Apply Losses to 2004 Taxes

When a large geographic area suffers a disaster, the President
can declare it a federal disaster area. President Bush has made
such a declaration for the Gulf Coast area.

While you’ve probably heard such declarations occur over the
years, I doubt it means much to you. The declaration, however,
has major implications for recovery efforts. Initially, the
declaration of a federal disaster area means the federal
government is going to provide disaster relief loans, special
grants that don’t have to be repaid, unemployment benefits and a
variety of other assistance. It also signifies a major tax break
for impacted businesses.

When a business suffers a loss, the deduction must typically be
made in the year the loss occurred. With Hurricane Katrina, the
deduction would typically occur when you file taxes in 2006. The
problem, of course, is 2006 is a very long time from now if your
business is destroyed. You will find this hard to believe, but
the IRS is here to help.

The IRS is going to give you cash. Under current tax law, you
may make a special election to deduct your business losses
caused by Katrina on your 2004 taxes. By doing this, you do not
have to wait till 2006 to get a tax refund. You don’t have to do
this, but it may be the key to getting necessary cash.

To make the special election, you must claim it on your 2004
taxes. If you have already filed taxes for 2004, you can file an
amended tax return claiming the deduction.

In Closing

Using this tax strategy can help generate badly needed cash.
Make sure you pursue the strategy with the help of your tax
professional. If all your records are destroyed, you can order
copies of past tax returns from the IRS.

August 23, 2014

Loss of Job Still Requires Filing Taxes

Filed under: Tax — Tags: , , , , , — admin @ 12:47 pm

Even if you lost your job this past year, it’s still mandatory that you file your taxes. If you were part of the more than 1.5 million Canadians who found themselves unemployed due to the recession, paying taxes is most likely the last thing you want to think about. Most people who lost their jobs either turned to unemployment insurance or became self-employed, either way, creating new challenges on their 2009 tax returns.

People who have been exercising the use of their unemployment insurance are generally surprised to find out they have to claim their benefits as income on their tax return. If you’ve started a business in the past year, you are considered self-employed and are now responsible for keeping track of expenses for things such as your home office, gas allowance and earnings. A few tips that may help get your over the filing tax hurdle:

If you’re collecting unemployment insurance benefits, the government will provide you with a T4E slip for receiving them. This slip is to be used to claim the proper amount of insurance as income on your tax return as this income is taxable and needs to be included in your total income for the year.

Canada does not support job-hunting tax credits, which means, unlike our American neighbours, you cannot use job-hunting as a tax expense in Canada. However, if you accept a new job and move more than 40 kms for it, you can deduct some of those moving expenses. If you decide to take a new path entirely and go back to school, you are allowed to borrow money from you RRSPs to use for tuition.

If you are re-training, upgrading or starting over for a new career, you can borrow from your RRSP under the Lifelong Learning Plan to pay for the costs of going to school. The government will allow you to withdraw up to $20,000 over a four-year period for this purpose, however, once you graduate or finish the course, the money must be repaid within ten years. Also, if your re-training involves government assistance tuition, the tuition is considered a taxable benefit and must be claimed. You can claim those benefits against your student credits to help offset the income amount. These student credits would include things like tuition fees, education amount and the Textbook Tax Credit.

Most people don’t realize that it is perfectly okay to collect EI insurance and start your own business. You do need to be able to prove that you are operating a business in the event CRA asks.

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