1. Northern Residents Deduction
NRD on-Line 2011
Northern Residents Deduction
Northern Residents Deduction Seminar
Pamela Kolosky

2. Northern Residents Deduction Seminar
NRD on-Line 2011
References
Form T2222
T4039 – Northern Residents Deduction – Places in Prescribed Zones
TTS Reference Book (includes T4039)
IT-91R4 Employment at Special Worksites or Remote Work Locations
And your colleagues
Northern Residents Deduction Seminar
Pamela Kolosky

3. Northern Residents Deduction Seminar
NRD on-Line 2011
Overview
Two deductions:
Residency deduction
Basic
Additional
Travel deduction
Zone A and Zone B
T2222 form
Line 255
TTS Reference Book
Fig 39: Prescribed Zones for the Northern Residents Deductions.[Page 39]
First - A residency deduction, which is composed of‟:
 A basic residency amount that may be claimed by all taxpayers who meet the requirements, and
 An additional amount claimed by taxpayers who are the only person claiming the basic residency amount for a dwelling, which they maintain and live in; and
Secondly -  A travel deduction for taxpayers who meet the residency requirements discussed below and receive taxable employment benefits for travel.
Amount to claim is based on the zone the taxpayer resides in.
TTS Reference Book
Northern Residents Deduction Seminar
Pamela Kolosky

4. Residency Requirements
NRD on-Line 2011
Residency Requirements
Must reside in a northern area for a minimum of 6 months ending or starting in the taxation year
Moving from one zone to another doesn’t break the six month requirement
First test of what the taxpayer will qualify to deduct is based on how long they reside in a northern area
must be six consecutive months
actual number of days they can claim in a tax year will be determined by other factors
Illustration 1
They shouldn’t make a claim until they can support 6 months - ie moved Nov 1, will qualify for 6 mos on April 30 of the following year and will be able to claim Nov 1 – Dec 31 (the days in the tax year)
Moving from one zone to another doesn’t break the six month requirement
Northern Residents Deduction Seminar
Pamela Kolosky

5. Absences from a Prescribed Zone
NRD on-Line 2011
Absences from a Prescribed Zone
If broken by only days the six months will still be recognized
If broken by only days the six months will still be recognized
GO THRU THE court cases
Home & family outside the zone, length of time away, or whether there is another home even, will be deciding factors
Northern Residents Deduction Seminar
Pamela Kolosky

6. Northern Residents Deduction Seminar
NRD on-Line 2011
Students
Students can claim months that they are in prescribed zone and their time away doesn’t break the six months if the zone is their principal place of residence
Students can claim months that they are in prescribed zone and their time away at college/univ doesn’t break the six months, if the prescribed zone is where their principal place of residence is
Northern Residents Deduction Seminar
Pamela Kolosky

7. Northern Residents Deduction Seminar
NRD on-Line 2011
Death in the Year
Can be claimed up to the time of death
Well Duh!!!
Northern Residents Deduction Seminar
Pamela Kolosky

8. Residency Details on Form T2222
NRD on-Line 2011
Residency Details on Form T2222
Residency Details on Form T2222
1st know what zone you are claiming for
Enter in step 1 along with the residency period
See TTS page
Completing Step 1
Eg 181 days A zone (Jan 1- June 30) and
184 days B zone (Jul 1 – Dec 31)
place of residence is entered exactly as it is shown
on the CRA list
A moving date should not be counted twice = make sure total days is 365 or 366 in a leap year A
High Level AB B
Fairview AB
Northern Residents Deduction Seminar
Pamela Kolosky

9. Northern Residents Deduction Seminar
NRD on-Line 2011
Question 1
a. On May 1, Frank began working four weeks on – two weeks off on the construction of a mine in Voisey‟s Bay, Labrador. While in Voisey’s Bay, he lived in employer-provided accommodation. During his two weeks off, he returned to his wife and family in St. John’s where he has his principal residence. All places in Labrador are in Zone A for the purpose of the northern residents deductions.
b. From February 1 through the end of August, Claude worked on a short-term contract in Whitehorse, Yukon Territory. During that period, he lived in a rented one-bedroom apartment. In September, Claude returned to Vancouver, where he had lived before he accepted the position in Whitehorse.
c. Cynthia’s home is in The Pas, Manitoba, which is in Zone B for the purpose of the northern residents deductions. In September, she moved to Winnipeg to
attend university. While in Winnipeg, she lives in a student residence. However, she returns to The Pas at the end of every semester.
Q1 Determine whether the taxpayers described below are entitled to claim the northern residency deductions, and explain the reasons for your answers.
Since Cynthia did not establish a permanent residence in Winnipeg and returned to The Pas at the end of each semester, her sojourns in Winnipeg will not constitute an interruption of her six-month residency requirement and she will be eligible to claim the northern residents deductions.
Frank’s ordinary residence is in St. John’s and he returned every four weeks for two-week periods. He did not reside in Voisey’s Bay for a continuous period of six months. He will therefore not be able to claim the northern residents deductions.
Claude can claim the residency deduction for the period February 1 to August 31 since he lived in a prescribed zone for more than six complete months.
Northern Residents Deduction Seminar
Pamela Kolosky

10. Basic Residency Amount
NRD on-Line 2011
Residency Deduction
Basic amount is $8.25 for each day in Zone A
Basic amount is $4.125 for each day in Zone B
Basic Residency Amount
Residency Deduction
Basic Residency Amount
Basic amount is $8.25 for each day in Zone A
Basic amount is $4.125 for each day in Zone B
Northern Residents Deduction Seminar
Pamela Kolosky

11. Additional Residency Amount
NRD on-Line 2011
Additional Residency Amount
In additional to the basic amount, an additional amount equal to the basic amount can be claimed if:
The basic has been claimed;
The residence is a “self-contained domestic establishment”
Self contained domestic establishment
House
Apartment
Additional Residency Amount
In additional to the basic an additional amount equal to the basic can be claimed if:
The basic has been claimed;
The residence is a “self-contained domestic establishment”; and
Self contained domestic establishment
House
Apartment
Similar structure where a person generally sleeps and eats
It doesn’t matter who pays the rent, mortgage or whatever, the deduction is based on RESIDENCY
Northern Residents Deduction Seminar
Pamela Kolosky

12. Additional Residency Amount cont.
NRD on-Line 2011
Additional Residency Amount cont.
No other person living in the dwelling claims the basic residency amount for the same period
Zone A – Residents of prescribed northern zones
$8.25/DAY
Zone B – Residents of intermediate zones
$4.125/DAY
DOES NOT INCLUDE A ROOM IN A BOARDING HOUSE, HOTEL, BUNKHOUSE, OR DORMITORY
No other person living in the dwelling claims the basic residency amount for the same period
Zone A – Residents of prescribed northern zones
$8.25/DAY
Zone B – Residents of intermediate zones
$4.125/DAY
Illustration 2
DOES NOT INCLUDE A ROOM IN A BOARDING HOUSE, HOTEL, BUNKHOUSE, OR DORMITORY
Northern Residents Deduction Seminar
Pamela Kolosky

13. Reduction of Non-Taxable Benefits for Board and Lodging
NRD on-Line 2011
Reduction of Non-Taxable Benefits for Board and Lodging
This is only for people whose principal residence is not in a prescribed zone Their claim for northern is reduced by the amount in Box 31 of the T4
Reduction of Non-Taxable Benefits for Board and Lodging
This is only for people whose principal residence is not in a prescribed zone
They may receive a non-taxable allowance identified in Box 31 of the T4, for being at a special worksite
Their claim for northern is reduced by the amount in Box 31
If special work site is in zone A, reduce the Zone A claim at Line 4 of the T2222; if in Zone B, then reduce zone B line 9.
Northern Residents Deduction Seminar
Pamela Kolosky

14. NRD on-Line 2011
Net Income Limitation
This deduction is limited to 20% of the taxpayer’s net income
Deduction is limited to 20% of Net Income from line 236 of the T1, or the total of the residency amounts, whichever is less.
Northern Residents Deduction Seminar
Pamela Kolosky

15. Northern Residents Deduction Seminar
NRD on-Line 2011
Northern Residents Deduction Seminar
181
184
759 00
Completing Step 2
High Level
Eg 181 days A zone (Jan 1- June 30) X 8.25 =
Fairview
184 days B zone (Jul 1 – Dec 31) X = 759
Q 2, 3, 4
759 00
759 00
759 00
Pamela Kolosky

16. Northern Residents Deduction Seminar
NRD on-Line 2011
Question 2
On February 28, Horace moved from Log Cabin, British Columbia, where he had lived for 10 years, to Vancouver. For how many days, if any, may Horace claim the northern residents deductions this year?
Since his overall period of residence was for a continuous ten years, he can claim the deductions for the 59 days he lived in Log Cabin during the taxation year.
Northern Residents Deduction Seminar
Pamela Kolosky

17. Northern Residents Deduction Seminar
NRD on-Line 2011
Question3
Raymond and his wife, Lorraine, have for the entire year jointly maintained their house in Labrador City where they are both employed. Indicate three ways in which they can claim the residency deduction, and show the amount of the deduction that each would claim, assuming they each have an income of $30,000. (Assume there are 365 days in the current tax year.)
Raymond Lorraine
Raymond claims the basic and additional amount
for 365 days ($8.25 x 365) + ($8.25 x 365) $6, nil -
b. Lorraine claims the basic and additional amount
for 365 days ($8.25 x 365) + $8.25 x 365) nil $6,022.50
c. Raymond and Lorraine each claim the basic
residency amount for 365 days ($8.25 x 365) $3, $3,011.25
Northern Residents Deduction Seminar
Pamela Kolosky

18. Northern Residents Deduction Seminar
NRD on-Line 2011
Question 4
In what circumstances must a non-taxable benefit received in respect of board and lodging at a special work site be subtracted from the total of the northern residency deduction?
It must be subtracted only if the non-taxable benefit was reported in box 31 of the T4 and the recipient also maintained a principal place of residence located outside of a prescribed zone at the time the benefit was received.
Northern Residents Deduction Seminar
Pamela Kolosky

19. Northern Residents Deduction Seminar
NRD on-Line 2011
Travel Deduction
Box 32 – indicates a taxable benefit for travel originating in a prescribed zone;
Is already included in Box 14
Box 33 – indicates a taxable allowance for medical travel originating in a prescribed zone.
The amount is included in Boxes 14 and 32 and should not be entered on the T1
Travel Deduction
Use the amount out of Box 32 or 33 that relates to each individual trip
Box 32 – this indicates a taxable benefit for travel in a prescribed zone, and is already included in Box 14. It may affect the amount of the northern residents travel deduction
Box 33 – this indicates a taxable allowance for medical travel in a prescribed zone. The amount is included in Boxes 14 and 32 and should not be entered on the T1. DTmax has a ‘memo’ selection for it in the Footnotes section of the T4 entries. It may affect the amount of the northern residents travel deduction
Northern Residents Deduction Seminar
Pamela Kolosky

20. Northern Residents Deduction Seminar
NRD on-Line 2011
Medical Trips
Medical trips for medical services that are not available in the centre where they reside
There is no limit to the number of medical trips
IF CLAIMED HERE CANNOT BE CLAIMED AS MEDICAL EXPENSES ON THE SCHEDULE 1 OR AB 428 BY THE TAXPAYER OR THEIR SPOUSE OR COMMON LAW PARTNER
Eligible trips
Medical trips
Medical trips for medical services that are not provided for in the centre where they reside
There is no limit to the number of medical trips – IF CLAIMED HERE CANNOT ALSO BE CLAIMED AS MEDICAL EXPENES ON THE SCHEDULE 1 OR AB 428
Northern Residents Deduction Seminar
Pamela Kolosky

21. Northern Residents Deduction Seminar
NRD on-Line 2011
Other travel
A variety of reasons – Travel is limited to 2 trips per household member per year
Cost of trip and the benefit from the Employer must be in the same year
Other travel
A variety of reasons (personal, holiday, business) – limited to 2 trips per household member per year is allowed for such travel
If they take a trip that spans two calendar years (Christmas vacations), he or she may claim the deduction in the year that the benefit is reported on the T4 slip.
Northern Residents Deduction Seminar
Pamela Kolosky

22. Eligibility Requirements
NRD on-Line 2011
Eligibility Requirements
MUST MEET THE RESIDENCY REQUIREMENTS
Must have Box 32 and/or 33 on T4
Employment must be in a prescribed zone
Must not be related to employer
Must live with the taxpayer
Must not be receiving reimbursement or a non taxable allowance for the travel
Eligibility Requirements
 A. Must meet the residency requirements - If not able to support 6 mos continuous residency, whether claimed or not, will not be able to claim their travel amounts
Must have box 32 or 33 on T4 . (box 32/33) If included in income, the taxpayer can deduct amounts against that amount
Employment must be in a prescribed zone
Must not be related to employer
Must live with the taxpayer
As with all deductible expenses, cannot claim expenses that are reimbursed to the taxpayer or amounts that they’ve received a non-taxable allowance for
Northern Residents Deduction Seminar
Pamela Kolosky

23. Northern Residents Deduction Seminar
NRD on-Line 2011
Maximum Travel Amount
The least of:
The amount of the benefit
Reasonable split between trips taken
The actual cost of the trip
Air, train, and bus, Automobile expense
Meals, hotel, motel, camping fees
Other incidental expenses taxi, road or ferry tolls
The lowest airfare to the designated city
The lower economy airfare on the date the travel began
The least of three amounts:
The amount of the benefit
Reasonable split between trips taken
The actual cost of the trip
Air, train, and bus
Automobile expense
Meals, hotel, motel, camping fees.
Other incidental expenses taxi, road toll, ferry tolls
The lowest return airfare to the closest designated city
The lower economy airfare on the date the travel began
Also note:
When the travel originates from a B zone, the travel amount will be reduced by 50%, the same as the Resident Deduction amounts.
Figure 16:Per-Kilometer Rates for Moving Expenses, Medical Travel and the Northern Residents Deduction. [Page 12]
Illustration 3 – page 10
Northern Residents Deduction Seminar
Pamela Kolosky

24. Northern Residents Deduction Seminar
NRD on-Line 2011
Northern Residents Deduction Seminar
Column 4: Travel Expenses
Trip 1 – GP to Calgary 720 km X 2 =
1440 Km X $.515/km =
Hotel =
Meals = 3/day X 3 people X
4 days X $17/meal
Total
Trip 2 – GP- Sylvan Lk 570 km X 2 =
1140 Km X $.515/km =
Campground fees =
Meals = 3/day X 3 people X 2 days = 18 X $17/meal
Total
Column 1: Persons on trip & originating Zone; Trip number
Column 2: Purpose of the trip (Medical or Other)
Column 3: Box 32/33 on T4 = 3000, 2 Trips - apportioned as 1500 for each trip
Column 6:
Lower of Columns 3, 4, and 5
Enter for A / B Zone (from Column 1)
Column 5: Lowest return time of trip Closest designated city is Edmonton
$350 X 3 people = $1050
Claiming just trips – spouse has full residency claim (can only be claimed by the person with a travel benefit on T4)
Box 32 = 3000
Trip 1 GP to Calgary 720km X 2 X $.515 =
Hotel =
Meals 3 X 3 X 4days X $17 = $612
Total =
Trip 2 GP to Sylvan lake 570km X 2 X .515 =
Campground = 270
2 travel days meals 3X3X 2 days X17 = 306
Total =
Lowest return Airfare $350 X 3 people = 1050
Claim is then taken at 50% because the trips originated in a B Zone
Pamela Kolosky

25. Supporting Documentation
NRD on-Line 2011
Supporting Documentation
Rent receipts Tax bills Utility bills Must have service address and dates that you are claiming Travel – Receipts to support the trip (hotel, meals, airfare if flew)
Supporting Documentation
For each residence claimed in the tax year, the supporting proof should show service dates for the beginning & end period claimed plus a couple in between.
Rent receipts
Tax bills
Utility
Must have service address and dates that you are claiming
Where the receipts are in a roommate’s name, a statement from the roommate stating what amounts they’ve claimed, if any, that is signed, dated, and includes their phone number.
Claims for travel should include cost of trip receipts that are added to the simplified mileage & meal totals.
Note that Detailed mileage requires that the taxpayer keep all their operating cost receipts, and total mileage for the entire year to figure out the cost per km to use – just easier to use simplified rates.
Illustration 4, 5, 6 page 12
Q 5, 6, 7
Northern Residents Deduction Seminar
Pamela Kolosky

26. Northern Residents Deduction Seminar
NRD on-Line 2011
Question 5
Roy has lived in Red Lake, Ontario, for many years. Roy’s only income in the year was from employment insurance benefits and social assistance. During the year, he travelled to Toronto to receive medical care not available in Red Lake. Can Roy claim the travel deduction for northern residents? Why or why not?
Roy cannot claim the travel deduction for northern residents because he has not received a taxable benefit from employment in a prescribed zone.
Northern Residents Deduction Seminar
Pamela Kolosky

27. Northern Residents Deduction Seminar
NRD on-Line 2011
Question 6
Mark lived in Churchill, Manitoba, for several years with his wife and child (both have no income). Mark is as an engineer and receives taxable benefits for trips taken by himself and household members. In February, Mark’s son, Hugo, developed meningitis and Mark travelled with him to Winnipeg for medical attention. Sadly, Hugo died in March. Mark and his wife travelled to Brandon for Hugo’s funeral. In August, the couple travelled to Prince Edward Island for a two-week holiday. In November, following the death of his mother, Mark and his wife again travelled to Brandon to attend the funeral. How many of the trips can Mark claim the travel deduction for northern residents? Indicate how you determine your answer.
Mark can claim 3 trips: the trip made for medical purposes, and a maximum of two of the trips made for other reasons.
Northern Residents Deduction Seminar
Pamela Kolosky

28. Northern Residents Deduction Seminar
NRD on-Line 2011
Question 7
Weary of city life, Suzanne and Robert Grenier moved from Edmonton to Rainbow Lake, AB, on February 1, 2010 where they lived and worked for the remainder of the year. Their address is General Delivery, Rainbow Lake, Alberta, T0H 2Y0. Robert took a trip in August to attend a relative’s funeral. The trip cost him $230. At the time of the trip, the lowest return airfare to the nearest designated city was $450. Suzanne’s net income for the year was $8,000 and Robert’s was $37,600. Neither received any taxable travel benefits through employment and neither worked at a special work site. Determine the amount of their northern residents deductions by completing Robert’s Form T2222 reproduced on pages Q.4 and Q.5. Robert and Suzanne have decided that Robert will claim both the basic and the additional residency amounts because that will result in a higher overall benefit.
Northern Residents Deduction Seminar
Pamela Kolosky

29. Northern Residents Deduction Seminar
NRD on-Line 2011
Northern Residents Deduction Seminar
Pamela Kolosky

30. Northern Residents Deduction Seminar
NRD on-Line 2011
Review Problem 1 & 2
Open DTMax and prepare Tax returns for
Donald Smith
Abe & Mary Kekersten
Northern Residents Deduction Seminar
Pamela Kolosky

31. TTS- Student Evaluation Form
NRD on-Line 2011
TTS- Student Evaluation Form
Please fill out the Student Evaluation Form at the back of your text.
Course Title: Northern Residents Deduction Seminar
District: Enter your originating office (FM, HL etc.)
Instructor Name: Pamela Kolosky
Classroom: Please evaluate the program GoToMeeting.com, and the audio portion.
Forward via Fax:
or scan-in and to:
Pamela Kolosky

32. Thank you for participating
NRD on-Line 2011
Questions?
End 0f
Session
Thank you for participating
Northern Residents Deduction Seminar
Pamela Kolosky