Taxing Students Taxing Me

I told some stories in the past about troubles I sometimes ran into while preparing tax returns, but I did omit one very common source of problems: student returns.

First, the parents sometimes presented me with headaches, mainly because they did not grasp the basic concept behind students and income tax to begin with. Some parents figured that because they paid for their son or daughter to go to university that they should be able to deduct any and all expenses relating to the child's education.  So, I'd be facing an aggressive parent veering into anger when I told them the expenses belong to the child, not to the parent. The child can claim the expenses; the parent cannot. Period. I do not make the rules, so please stop yelling at me about how you paid for everything god-damn-it with your own hard-earned sweat. The child has to prepare a return and then can transfer part of the resulting deduction--up to $5,000--to the parent, if the child wishes. It is their money even if it originally came from the parent.

Once that issue has been faced and the parent has ordered their child to prepare an income tax return immediately so they can transfer the money to them (did I dare inform them that they could not be present while I prepared their child's return unless the child gave explicit permission for them to be present?), they haul out a huge pile of receipts for text books–and it falls to me to tell them that the cost of textbooks is not deductible.  What do I mean? Do I not realize that it cost over $600 just for one year? etc., etc. Yes, I realize that, but please stop hitting me–go hit your member of parliament instead. That was modified somewhat a few years ago when an amount for textbooks was added onto the basic student deduction of $400/month for full-time study. The government allowed that students can claim $65/month enrolled full time for textbooks--and yes, I know that that doesn't nearly cover the real cost. And, I don't want the receipts.

Okay, next hurtle: residence fees. By now any experienced tax preparer is hiding under his or her desk, knowing what comes next. The deduction for residence fees is set at $25. For the year. That's it. Sorry you spent several thousands of dollars, but the deduction is $25.

It's a entirely different set of problems when dealing with a student without parents. Many of them have no idea what income taxes are about. All they know is they were told to come to my office and I'd give them some money. After we'd get through the preliminaries, like name, address, social insurance number (which often resulted in a panicky phone call to a parent to get this number this old guy was bugging them about), we'd get to the hard part: "Do you have your T2202?" "What's that?" "The official receipt from the university." Blank stare.

"Okay," I'd ask, "Do you have an online account at the university?" (They all do.)  "Log into your account and go to 'billing,' 'receipts,' 'account details' or whatever they call it at that institution and search for 'T2202.' Print it and bring it with you next time you come in." "Can I get my money today?"

I then have to explain that because they had not worked--and so had no deductions at source that could be refunded--all they were likely to get would be a GST refund, but, it was very important that they file a return because of the education credit. They never heard of it. I'd have to explain carefully. Tuition fees plus the education amount (total $465 month, including the amount for textbooks, while enrolled full-time) together make up the education credit--which is non-refundable. Here's where many lose interest, because "non-refundable" means no money in their pocket today. I try very hard to stress that this amount is worth a fortune to them because any unused amounts are carried forward from one year's taxes to the next and so, in the future after they've graduated and start making some real money, they get to deduct it from their taxable income--which could mean they'd not have to pay any income taxes at all for a couple of years after they graduate. I can see their eyes glaze over: the future is boring. They came to me because their friends told them I'd give them some money, not a lecture about the future.

Next: spouses. "That's MY money, not hers!"