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Unemployed in '03? Here are some tax tips to make the best of it

Professor Geoff Cox of Plymouth University in England headed up a research study last year in which they tested six Sulawesi crested macaque monkeys. Researchers couldn't test whether an infinite number of monkeys with an infinite number of typewriters could produce the works of Shakespeare, so they instead tested these six monkeys on a computer over a four-week period, according to The Guardian newspaper. The monkeys produced about five pages of text altogether, mostly consisting of the letter S. There were, apparently, greater signs of creativity towards the end, with the letters A, J, L and M making fleeting appearances.

A strange job to have, for sure, but it beats unemployment by a mile. Today, I want to share some tax tips with those who may have been unemployed at some point in 2003.

1. Defer RRSP deductions. You can deduct your 2003 contribution to your registered retirement savings plan in 2003 or any future year. If you expect to be in a higher tax bracket in 2004, consider saving your RRSP deduction for 2004. It'll save you more tax.

2. Deduct moving expenses. If you had to move in 2003 to take up new employment, you may be able to deduct moving costs. Your new home must be at least 40 kilometres closer than your old home to your new work. Use Form T1M to report moving expenses and claim them on line 219.

3. Deduct legal costs related to retiring allowances. As a general rule you're able to deduct legal costs incurred to collect or establish a right to retiring allowances or salary owed to you. Don't forget to deduct these costs on line 232.

4. Deduct clawbacks of EI benefits. If you collected employment insurance benefits in 2003 and are facing a clawback of those benefits as a result of your income being too high, deduct that clawback at line 235. A repayment of EI that may have been paid to you in a prior year is deducted on line 232.

5. Deduct rollovers of retiring allowances. If you received a retiring allowance upon leaving your last employer, you may have been entitled to roll all or a portion of that amount to your RRSP tax free. If you made this rollover, be sure to use Schedule 7 of the tax forms and deduct that amount on line 208 of your tax return.

6. Claim tuition and education amounts. If you went back to school in 2003, don't forget to claim a credit for your tuition and education amounts on line 323 of Schedule 1. If you don't need the credits to reduce your taxes to zero, you can transfer them to a spouse, parent, grandparent, or carry the amounts forward.

7. Ensure your spouse claims a spousal credit. If you were out of work in 2003, your income may be low enough (it must be under $7,245) that your spouse may be entitled to a spousal amount. Your spouse can claim the credit on line 303 of Schedule 1.

8. Report your spouse's Canadian dividends. It may be possible to transfer all your Canadian dividends to your higher-income spouse. You can make this transfer only where it will increase the spousal amount that your spouse can claim. This can save the family tax by allowing your spouse to use the dividend tax credit, which may not be helpful to you.

9. Go back and get a signed T2200. If you incurred deductible employment expenses at your last job, you may be able to deduct those costs, but you'll need your old employer to sign Form T2200 and keep it on hand in case Canada Revenue wants to see it. Report the expenses on Form T777 and claim them on line 229.

Tim Cestnick, FCA, CFP, TEP is author of The Tax Freedom Zone and Winning the Tax Game 2003. He is managing director, National Tax Services, at AIC Ltd.

tcestnick@aic.com



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