Posted on: 26-03-07 15:02:10
Hello friends,
I have a joint account alongwith my wife in a bank.
The T5 mentions only my name.
I'm filing the tax return and to minimize our tax liability,I notice that if I put the interest amount on my wife's return, we get some advantage.
My question is - Can I show that interest income from the bank in my wife's return even though the T5 mentions only my name(as primary bank account holder of a joint acount)?
Your advise would be greatly appreciated.
J
First a disclaimer. I am not a tax consultant or a advisor licensed to give you any advise. So you may want to not completely or in part not agree me and i am not liable for any wrong advise.
Now, you can use the same T5. CRA would have the info that this a joint account and any one of you can claim the income.
Quote:
Originally posted by jackofall
Hello friends,
I have a joint account alongwith my wife in a bank.
The T5 mentions only my name.
I'm filing the tax return and to minimize our tax liability,I notice that if I put the interest amount on my wife's return, we get some advantage.
My question is - Can I show that interest income from the bank in my wife's return even though the T5 mentions only my name(as primary bank account holder of a joint acount)?
Your advise would be greatly appreciated.
J
Quote:
Originally posted by jackofall
Hello friends,
I have a joint account along with my wife in a bank.
The T5 mentions only my name.
I'm filing the tax return and to minimize our tax liability,I notice that if I put the interest amount on my wife's return, we get some advantage.
My question is - Can I show that interest income from the bank in my wife's return even though the T5 mentions only my name(as primary bank account holder of a joint account)?
Your advise would be greatly appreciated.
J
As per CRA you can not do it.
Here is how CRA would like to report interest income received on joint bank accounts:
Generally, you report your share of interest from a joint investment based on how much you contributed to it.
Example
Sally and Roger received a T5 slip from their joint bank account showing the $400 interest they earned in 2006. Sally had deposited $4,000 and Roger had deposited $1,000 into the account.
Sally reports $320 interest, calculated as follows:
$4,000 (her share) × $400 (total interest) = $320
$5,000 (total)
Roger reports $80 interest, calculated as follows:
$1,000 (his share) × $400 (total interest) = $80
$5,000 (total)
Bank accounts
Report interest paid or credited to you in 2006, even if you did not receive an information slip. You may not receive a T5 slip for amounts under $50.
_________________________________________________________
We all know that it is difficult to keep track of the expenses incurred by each spouse coming out of joint accounts, the interest income should ideally be be reported on the ratio of amount deposited by each spouse in the joint account.
However, this causes a little problem as this ratio would change every year as the income level of each spouse would be different and you have to keep calculating this ratio every year. Hence a better choice would be to report the interest income from joint accounts as 50-50 every year so that this ratio would always remain constant.
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Pramod Chopra
Senior Mortgage Consultant
Mortgage Alliance Company of Canada
Correct lawful advise Pramodji. But, most of the clients do not want to understand the legal situation and want to report the interest income in lower spouse's return. Reporting 50:50 is the practical soluction to this problem.
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Live and Let Live. Together we can make a difference.
DP JAIN, CPA, CGA, CPA (US), CA(I), LL.B.(I)
416-305-0080
(Loans, Mortgage, Tax, Accounting, Investments)
Quote:
Originally posted by Pramod Chopra
As per CRA you can not do it.
Here is how CRA would like to report interest income received on joint bank accounts:
Generally, you report your share of interest from a joint investment based on how much you contributed to it.
Example
Sally and Roger received a T5 slip from their joint bank account showing the $400 interest they earned in 2006. Sally had deposited $4,000 and Roger had deposited $1,000 into the account.
Sally reports $320 interest, calculated as follows:
$4,000 (her share) × $400 (total interest) = $320
$5,000 (total)
Roger reports $80 interest, calculated as follows:
$1,000 (his share) × $400 (total interest) = $80
$5,000 (total)
Bank accounts
Report interest paid or credited to you in 2006, even if you did not receive an information slip. You may not receive a T5 slip for amounts under $50.
_________________________________________________________
We all know that it is difficult to keep track of the expenses incurred by each spouse coming out of joint accounts, the interest income should ideally be be reported on the ratio of amount deposited by each spouse in the joint account.
However, this causes a little problem as this ratio would change every year as the income level of each spouse would be different and you have to keep calculating this ratio every year. Hence a better choice would be to report the interest income from joint accounts as 50-50 every year so that this ratio would always remain constant.
Correct but not correct fully.
Theoratically, the withdrawls from this account have to be accounted too - as to whose account the withdrawl should be debited to.
Practically, a taxpayer, if using a software is asked the percentage that belongs to each spouse. If one answers it there, it is good enough. CRA will not come to ask for expalanation simply because they can never prove how much was spent on whose account and which withdrawl was for which spouse, or what was the ratio of withdrawls, since interest is paid on a daily basis.
Chandresh
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Chandresh
Advice is free – lessons I charge for!!
Quote:
Originally posted by chandresh
Quote:
Originally posted by Pramod Chopra
As per CRA you can not do it.
Here is how CRA would like to report interest income received on joint bank accounts:
Generally, you report your share of interest from a joint investment based on how much you contributed to it.
Example
Sally and Roger received a T5 slip from their joint bank account showing the $400 interest they earned in 2006. Sally had deposited $4,000 and Roger had deposited $1,000 into the account.
Sally reports $320 interest, calculated as follows:
$4,000 (her share) × $400 (total interest) = $320
$5,000 (total)
Roger reports $80 interest, calculated as follows:
$1,000 (his share) × $400 (total interest) = $80
$5,000 (total)
Bank accounts
Report interest paid or credited to you in 2006, even if you did not receive an information slip. You may not receive a T5 slip for amounts under $50.
_________________________________________________________
We all know that it is difficult to keep track of the expenses incurred by each spouse coming out of joint accounts, the interest income should ideally be be reported on the ratio of amount deposited by each spouse in the joint account.
However, this causes a little problem as this ratio would change every year as the income level of each spouse would be different and you have to keep calculating this ratio every year. Hence a better choice would be to report the interest income from joint accounts as 50-50 every year so that this ratio would always remain constant.
Correct but not correct fully.
Theoratically, the withdrawls from this account have to be accounted too - as to whose account the withdrawl should be debited to.
Practically, a taxpayer, if using a software is asked the percentage that belongs to each spouse. If one answers it there, it is good enough. CRA will not come to ask for expalanation simply because they can never prove how much was spent on whose account and which withdrawl was for which spouse, or what was the ratio of withdrawls, since interest is paid on a daily basis.
Chandresh
Am I missing something here?
I think I did mention about the expenses (withdrawls) coming out of joint accounts and it is a bit difficult to keep track all the expenses (withdrawls) and that's why I suggested a practical solution of sharing 50-50 between spouses.
So, you are saying that when the software asks for the percetage you can allocate even 100% to the spouse with NIL income in the whole year and CRA would not care about it?
CRA might not come after you for these small amounts immediately, but once a return is picked up for audit couple of years after, the tax payer would find hard to answer CRA's objections. And who knows then CRA might question other deductions too?
Its your call.
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Pramod Chopra
Senior Mortgage Consultant
Mortgage Alliance Company of Canada
CRA might not come after you for these small amounts immediately, but once a return is picked up for audit couple of years after, the tax payer would find hard to answer CRA's objections. And who knows then CRA might question other deductions too?
Its your call.
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Exactly right. I do face such type of cases quite often where a new client walks in my office with a audit case without having any logical and valid answers.
-----------------------------------------------------------------
Live and Let Live. Together we can make a difference.
DP JAIN, CPA, CGA, CPA (US), CA(I), LL.B.(I)
416-305-0080
(Loans, Mortgage, Tax, Accounting, Investments)
