Talking to Your Clients About When Minors Should File Tax Returns

by Craig Anthony

2 min read

If your clients have children, you may want to advise their children to file a tax return. In these cases, there are several topics you may want to discuss with your clients to help them decide.

Mandatory Filing

In most cases, minors only have to file returns if they owe taxes. Explain the basic personal amount to your clients. As of 2017, if their children make less than $11,474 in a year, they won’t owe any taxes. As a result, children don’t have to file a return unless your clients see an advantage from filing.

Changes at Age 18

One of the reasons why minors don’t have to file tax returns that often is because their wages aren’t subject to Canada Pension Plan premiums. Once your clients’ children turn 18, they have to make these contributions, and they have to remit a tax return if their earnings are over the CPP threshold of $3,500. Let your clients know about this eventuality so they can prepare accordingly.

Possible Refund

Even if your clients’ children aren’t required to file, there may be cases where filing could result in a refund. You may want to ask to see the paycheque stubs of all the children in the family so you can determine if a refund is imminent. Then, advise your clients accordingly.

Family Business

Hiring minors can be a great way for your business-owning clients to reduce their tax liability. While talking with your clients, make sure they understand that minors really have to work for the business, and the wages should be fair market wages. Having said that, you may want to go the extra mile and help your clients think of creative ways to get their kids involved in the family business. For example, if your clients’ kids scrub a bathroom at home and your clients pay the children allowance, your clients can’t claim a deduction for that. On the other hand, if your clients have their children clean the bathroom at their place of work, they can pay the children and claim a business deduction. Sometimes, it’s simply a matter of shuffling around where the work happens. These children don’t necessary need to file a tax return, but it creates a paper trail that may be helpful in case of an audit.

Effect on RRSP Contributions

Also, talk with your clients about the impact minor’s returns can have on future savings goals. Workers get to contribute a percentage of their income to their registered retirement savings accounts every month; if they don’t contribute the full allowance, it rolls into future years. Even if your client’s kids don’t contribute, filing a return increases the amount they can contribute in future years. Optimizing your clients’ tax returns may include helping them with their children’s returns. Remember to ask new clients if they have working children, and let them know the pros and cons of having children file returns. Going above and beyond with extra advice like this helps to keep clients coming back.

References & Resources

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