My client is a single mom and 2 of her children have 2022 tuition amounts. Neither the children nor the mom can use the tuition credits so the mom asked me if they can be transferred to their grandfather. I don’t do the grandfather’s tax return. How do I facilitate this in Taxcycle? If it fill out schedule 11 in the kids’ returns, it transfers to the mom.
The student may transfer an amount to their parent or grandparent, or to the parent or grandparent of the student’s spouse or common-law partner. The student will complete and sign the transfer section of their tax certificate and provide the recipient of the transfer with a copy. The parent or grandparent would enter this amount on line 32400 of their Income Tax and Benefit Return. I would assume the full $5,000 allowable transfer ($10,000 if it is both of the children). This means that the grandfather should add their grandchildren names on the dependent form to properly record the transfer.
In terms of the child’s tax return, they would have to report transfer amount on schedule 11 (federal tuition and textbook amounts) and report it on line 32700 (federal tuition amount transferred) as $5,000 transferred.
Thanks @GuyWhoPlaysGolf . My client is not the grandparent, just the students. My question is if I put the transfers on the students’ schedule 11, Taxcyle automatically puts it to the mom and then I have to override it. I don’t like overrides but is that my only option?
Had a similar situation last year, my solution was to override “amount to transfer” on the dependent info screen (parent’s return) + detach the child before filing to be 100% sure.
Thanks @LMK. I guess I will have to override. I suppose I could file the kids as nothing transferred and then if Granddad’s accountant takes the credit, I can adjust line 32700 of the kids 2022 returns after the fact. Just trying to get through tax season here and I don’t know what Granddad is going to end up doing.
I’d double check on Granddad’s plan with mom before filing the kids…in hopes of avoiding a CRA review of the adjustment request!
Many seniors have low income, so if grandpa’s non-refundable credits (before any tuition transfers) are enough to reduce his tax payable to $0.00, then there is no value transferring the tuition to him. And if he can benefit, would he require the full amount of federal and perhaps provincial credits available to be transferred. Ex: if the child can transfer $5,000 federal + $5,000 provincial credits, but grandpa only needs $1,000 federal and perhaps 3,000 provincial to reduce his tax payable to $0.00, then it doesn’t make sense to transfer the full $5,000 of each to him. So always a good idea to verify that the person receiving the transfers can actually benefit from them.
If you set the transfer on the child’s return to transfer the max (federal + provincial), but the transfer does not get used by the other individual, I don’t think CRA will automatically adjust the available carryforward on the child’s return. An adjustment will have to be filed to get those unclaimed credits back to the child. I’ve never encountered this scenario, but something to consider - don’t want the child’s credits to be sent to limbo and never applied by anyone, as that’s a real waste!
Finally, there is nothing wrong with the child keeping the credit for themselves to offset potential future income they hope to earn in future tax years. I always have a conversation with the child before doing these transfers, explaining to the child the refund value these credits have for themselves in future years, but also explaining the value they have to the caregiver especially in situations where the caregiver could benefit from the transfers. After these conversations, I have a few clients who decide not to transfer and keep the credits for themselves for future years, but most agree to the transfers as a reciprocal for room and board while they are studying and living with the caregiver.
Regarding overrides on the parent’s return: yes, from what I can see, you only have the two options:
- Uncouple the child’s return from the parent so that the tuition transfers don’t show up on the parent’s return (federal and provincial).
- Override to $0.00 the transfers on the parent’s return (Federal: Line 32400; Provincial: Line 58600). This is the option I often choose because sometimes there are other transfers, like medical, that I use in these coupled returns.
You can also record a memo on the over-ride lines reminding you why you over-rode this value, so that when you open the return next year, you are reminded about the issue.
There is also a NOTES tab on each TaxCycle return where you can document some of the issues you encountered and your remedies for same. F4 search box: “Notes” to access that tab.
I use the Notes tab all the time. A great tool for documentation.
Thank you all for your inciteful comments. Good point @kozakworld. The mom seems certain that grandpa can use it but you’re right, you never know. I might hold off on filing the kids for now. They both have no tax due or refund expected so no harm in waiting until after tax season to see what grandpa actually did. I will file mom now and wait on the kids as well as make a note in taxcycle.