Tax returns are a record of life's changes

To most of us, our tax return is just a dry record of numbers showing how much money we've made over the year and how much we owe the government.

But from the perspective of a tax preparer, our returns are a record of life's major changes in a community.

Our first job, where we went to school, who we formed relationships with, our career paths, when we had children and even what charities and political causes we support: it's all in our returns.

They plot when we come into this life — as dependants — and when we die, once the people in charge of our estate file our final returns.

"It's very interesting and very rewarding," said Doug Morgan, a tax preparer with H&R Block Canada in New Minas, N.S.

Community shake-ups show up in residents' returns

Morgan has prepared tax returns for clients in Nova Scotia for 32 years, close to three quarters of that in New Minas.

Doing taxes gives a preparer a certain perspective on the community.

"You see what their kids are doing in sports, what sorts of things they're contributing to," said Morgan.

"You also see what happens when, say, this major employer closes down: what happens to those employees and did [the company] have a plan to retrain them and get them into another place."

Morgan has helped parents and their children deal with questions around claiming tuition expenses, then worked with the children as they dealt with tax issues related to marriage and saving for retirement — all the while continuing to work with the parents as they considered when to take their pensions or sell off the family home.

New definitions of families reflected in tax forms

The profound changes in marital relationships and child support over the last 30 years have altered tax preparation.

'Technically, when it comes to doing taxes, you could have more than one spouse.' — Doug Morgan, tax preparer

For example, clients may still be legally married but living common law with someone else and their children.

"Technically, when it comes to doing taxes, you could have more than one spouse, and then you have to choose which spouse you're going to use on your tax return," Morgan said. "And then there are children who come into the equation, too."

Morgan's job also gives him a window onto how people spend their disposable income and allows him to trace changing patterns of behaviour within the community.

When it comes to charitable giving, for example, the returns he has prepared in recent years suggest the majority of people either don't donate to charities or don't claim the tax deduction.

That's a mistake, says Morgan, because for someone on a low income, the tax credit for charitable giving might be a better deal than contributing to an RRSP — but only if you ignore the considerable benefits of saving for retirement.

"If you're in the [lowest] tax bracket, if you're giving more than $200, you're getting a 29 per cent tax credit, but you may only get, say, a 23 or 24 per cent credit on your RRSP," Morgan said. "It is something that is underused."

Helping clients sort out the specifics of which credits and deductions apply to their situation is a large part of Morgan's job. With charitable donations, for example, a common scenario Morgan encounters is having to tell clients that their donation may have been to a worthwhile charity but one that wasn't registered with the Canada Revenue Agency, so it won't qualify for a tax credit.

Morgan says he would like to see more people make charitable donations — and not just for the tax credits.

"There are a lot of good causes — maybe not only locally but worldwide as well — that help make a difference in other people's lives," he said 

Rewarding work

Morgan says his work may seem dry to outsiders but has many rewarding aspects. Working with new immigrants, for example, is something he finds fulfilling.

"You can help them get their first returns done so they get set up," Morgan says. "After that, it's a much easier process for them. A lot of the time, they have difficulty understanding a lot of the paperwork."

In the three decades he has spent in the profession, Morgan has seen many of the same mistakes made time and time again — most of which could have been avoided with a little careful planning , he says.

A common error he sees many elderly couples make, for example, is to leave a family cottage to a child without considering the capital gains taxes that will have to be paid on the property, which the government deems to have been sold as of the date of death and which isn't considered a principal residence.

If there aren't many other assets, the property must be sold or mortgaged to pay the taxes due, something that might have been avoided had the parents transferred the property to the child while they were alive so there would be less of a capital gain.

"Or the parents can take out a life insurance policy that would be enough to cover the taxes upon death, and then the kids don't have the debt to deal with," said Morgan.

Having his clients' well-being in mind comes naturally for Morgan because many of those clients have been with him all the way from the very first year he started working in New Minas and have since brought their children and their tax-related business to him as well.

"I even have some clients who moved out of the area, but who still send me their returns from Ontario and Saskatchewan," he said.

"The clients want somebody they can trust. Whether it's you income tax or your retirement money, you don't want to be wondering all the time, 'Is this getting done right? Am I going to have problems later on?'"