Demystifying personal tax
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This document summarizes key information about personal tax filing in Canada. It discusses that most Canadians file their taxes electronically now, with benefits like faster refunds. It also reviews software options for doing taxes yourself and notes various tax filing deadlines. The document outlines deductions that reduce taxable income as well as credits that reduce taxes payable. It provides an overview of the process from calculating taxes owing to receiving refunds or paying balances.
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Demystifying personal tax
- 1. Demystifying Personal Tax PRESENTED BY PATTY AUGER, CA, CFP Patty Auger Consulting
- 3. Filing electronically Per CRA: - approximately 80% of Canadians filed their returns electronically for 2013 - filing electronically does not increase your chances of audit - could receive your refund in as little as 8 days (combined online filing with direct deposit) Other facts: - exceptions that may exclude return from being efiled - requirement to efile by 3rd party preparers - may receive request for information Patty Auger Consulting
- 4. Preparing your own return - LOTS of software options available! - Consider needs of the software before purchasing - Desktop / Online / Mobile products available - Free or “almost free” options on CRA website ◦ http://www.cra-arc.gc.ca ◦ search “Certified Software for 2015 - Canadian tax guide for personal tax – excellent resource!! Patty Auger Consulting
- 5. Filing deadline……. April 30th …..or is it? Patty Auger Consulting
- 6. Taxes payable due April 30th …..filing deadlines vary - regardless of filing date, all personal taxes payable are due April 30th (including GST - most individuals’ returns must be filed by April 30th - if you or your spouse carried on a business in 2014, both yours and your spouses returns are due by June 15th (including GST returns) - if you are legal rep of estate of a person who died in 2014, may have to file a return for that person (due date depends on date of death) - if the due date falls on a Saturday, Sunday or holiday recognized by CRA, must be received by the next business day - even if you cannot pay the balance right away, file the return on time! Patty Auger Consulting
- 7. Interest and penalties - late filing penalty (5% of balance plus 1% of balance per month to max 12 months; if charged late penalty in prior 3 years, could be 10% plus 2% per month up to 20 months); - balance owing- interest begins May 1st on any unpaid amounts at the prescribed rate (currently 5%) - failure to report income in consecutive years could be 10% of amount failed to report - interest on refunds starts May 31st (or 31 days after file your return or day after you overpaid your taxes) is paid to you at 3% Patty Auger Consulting
- 8. Books and records However you organize, all personal tax records must be kept for 6 years from the date of filing! CRA also now recognizes books and records retained electronically. THERE ARE EXCEPTIONS – information relating to long-term transactions such as investments and capital properties - until a notice of objection or appeal is completed and time for further appeal has expired Patty Auger Consulting
- 9. Understanding taxable income Patty Auger Consulting TAXABLE INCOME equals INCOME less DEDUCTIONS
- 10. Understanding taxable income Patty Auger Consulting Income sources - employment (T4, T4A) - pension (T4A) - business (net of expenses) - investments including rental properties (T3, T5, T5013) - insurance (EI/WCB) (T4E) - benefits (CPP/OAS/UCCB) (T4AP, T4AOAS, RC62) - other (RRSP & RDSP withdrawals /support payments received) (T4RSP/T4A)
- 11. Understanding taxable income Patty Auger Consulting Deductions - reduce income by 100% of amount incurred - RRSP contributions (limit) - union or professional dues - child care expenses (limit; T778) - moving expenses - support payments made - carrying charges and interest expenses - other (employment expenses, OAS clawback, pension split, capital losses)
- 12. Understanding taxes payable Patty Auger Consulting INCOME TAX CALCULATED less CREDITS equals TAXES PAYABLE
- 13. Understanding taxes payable - add 10% to all rates above for Alberta tax Patty Auger Consulting Income taxes calculated using taxable income and
- 14. Understanding taxes payable Patty Auger Consulting Credits - see Schedule 1 – USE THEM OR LOSE THEM - reduce taxes payable by 15% of amount calculated except donations - Children’s fitness amount – increased to $1,000 per child for 2014 - adoption expenses – increased to $15,000 for 2014 - tuition, education and textbook amounts (Schedule 11) ◦ $5,000 maximum transfer per child - medical expenses - > 3% of income before deductions or $2,171 - donations – 15% of first $200, 29% of all others (Schedule 9)
- 15. Understanding taxes payable Patty Auger Consulting Other Credits - political donations - Family Tax Cut (Schedule 1A) – maximum $2,000 credit, new for 2014
- 16. Refund or balance owing? Taxes payable (Schedule 1) are Increased by: - CPP and Ei payable on self-employment earnings Reduced by: - source withholdings - instalments - CPP overpayment - Working income tax benefit Patty Auger Consulting
- 17. You’ve filed your return…..what now? CRA may issue a Request for Information - 30 days to respond CRA will issue a Notice of Assessment (NOA) - review for completeness - includes RRSP contribution room - can file an objection up 90 days after day of NOA Patty Auger Consulting
- 18. Oh no….you missed including something…..what now? File a T1 Adjustment - must include all source documents - if adjusting a previous number, will also need to provide support for original amount submitted - can go back 10 calendar years Voluntary disclosure Patty Auger Consulting
- 19. What else is new? Lifetime capital gains exemption increased to $800,000 GST credit – do not have to apply, CRA calculates Enhanced Universal Child Care Benefit (UCCB) in 2015 - increase in 2015 from $100 to $160 per month per child under 6 - will replace child tax credit and receive benefit of $60 per month for children 6-17 Register for online mail with CRA – will receive email notification that mail for you to view on My Account secure online service Patty Auger Consulting
- 20. Thank you! Questions or comments? Please email me at paconsulting@shaw.ca Patty Auger Consulting
Editor's Notes
- Welcome – thank you to WINK Personal introduction
- How many self prepare vs have 3rd party prepare? How many file online (Efile or netfile) or still paper file? - Discuss difference between efile (paid preparer) and netfile (self prepared/family)
- exceptions to efiling = multiple jurisdiction / 7 Rental properties Common info requests – medical / donations / tuition
- Turbo Tax / Studio Tax (I use – donation – does not work for farms)
- Who believes that the filing deadline is April 30th?
- Taxes payable includes GST payable Business = farming, sole proprietor, partner – other than a business whose expenditures are primarily in connection with a tax shelter Can you file before the deadline? Absolutely – can post date payment to April 30th Even if you cannot pay the balance right away, file the return on time! Final return – date of death – april 30th (Jan – Oct 31 death date); 6 months after date of death (nov 1 – Dec 31); if carried on business, June 15th (Jan 1 – Dec 15th_; 6 months after date of death (Dec 16-31)
- Books and records NEXT – in order to understand what’s available, what’s new – need a brief overview of components of the tax return
- Deductions vs credits Discuss difference deductions reduce income $1 for $1 Credits reduces taxes payable at a rate of $0.15 for every $1 (some exceptions exist) Will discuss further RRSP – 18% of earned income from prior year; $2K over contribution limit 2015 – child care expense deduction increases by $1000 from $7k to $8k (<7 yrs) and $4K to $5K (7 and up to 16); from $10K to $11K if child eligible for disability tax credit
- Children’s arts = $500 per child - Changing to refundable credit in 2015 and forward
- Family tax cut = $2,000 credit maximum = $300 reduction to taxes payable; assuming a $50K differential between spouses and both spouses are not already over the maximum tax bracket ($136,270K) and at least one child living at home < 18 claimed by higher income spouse Political donations - >$1,275, maximum credit = $650
- Dealing with CRA – sometimes
- Dealing with CRA – sometimes better to deal directly with then rep however, tread carefully Voluntary disclosure – missed return or significant omission, can file so long as CRA has not requested or is not already reviewing the return year