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ICAO Volunteer Tax Clinics

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Volunteer Tax Clinic Guidelines ... Calculator, stapler, pens, pencils, etc. ... GST REBATE. GST. One claim per family. Always complete front page of T1 ... – PowerPoint PPT presentation

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Title: ICAO Volunteer Tax Clinics


1
ICAO Volunteer Tax Clinics
  • 2009 Training Session
  • Presented by
  • Rita MacDonald, CA
  • Tax Advisory and Compliance
  • Elements LLP

2
Agenda
  • Introduction
  • Tax Clinic Guidelines
  • Introduction to the Return
  • Hypothetical tax return - Problem 1
  • Hypothetical tax return - Problem 2
  • Using TaxPrep

3
Volunteer Tax Clinic Guidelines
  • Income threshold per household,
  • less than
  • with no dependents 17,000
  • with dependents 25,000
  • Exceptions, i.e. disabled
  • No business income or rental income

4
Volunteer Tax Clinic Guidelines
  • Assist in preparing return likely only for
    2008 some clinics may allow 2007 and 2006
  • Do not associate with false, misleading or
    incomplete returns
  • Do not give advice

5
What To Bring - Taxpayer
  • Information slips and receipts
  • Prior years tax return and assessment
  • Other necessary information
  • Taxpayer responsible for filing return

6
What To Bring - Volunteer
  • Calculator, stapler, pens, pencils, etc.
  • Blank paper (for schedules, i.e. list of medical
    expenses, donations)
  • T1 guide
  • Clinic Briefing Notes
  • Extra blank returns
  • Computer and printer (if using)

7
Completing the Return
  • Who must file a return?
  • Which T1 form to use (Special, General)?
  • Do lower income spouse first
  • Need details of spouses income (if not preparing)

8
The Income Tax and Benefit Return
  • 4 pages
  • Otherwise known as the Jacket
  • Page 1 Personal Identification, elections
    Canada, GST
  • Page 2 Total Income
  • Page 3 Deductions from income to get to Taxable
    Income
  • Page 4 Calculation of Refund or Balance Owing,
    Signature

9
IDENTIFICATION Page 1
  • Personal Information name, address, S.I.N.,
    D.O.B., marital status
  • Must include spouses information (common-law
    too)
  • PROVINCE OF RESIDENCE ONTARIO
  • Elections Canada, Question on Citizenship
  • GST always answer yes!!!!! (one per couple)

10
CALCULATING TOTAL INCOME Page 2
  • Page 2 of the Jacket
  • Record ALL taxable income here
  • Next 9 slides

11
Total Income Page 2
  • SLIPS (add together if more than one)
  • T4 Employment Income
  • T4E Employment Insurance
  • T5 Investment Income
  • T4(P) Pension Income
  • T4(OAS) Old Age Security AND Net Federal
    Supplements
  • T5007 Social Assistance

12
Total Income Page 2
  • Interest refund from CRA
  • include interest received on any tax refund in
    2008 (see NOA) (include on Line 121)
  • Universal Child Care Benefit RC62 slip
  • 100/month/child under the age of 6 (Line 117)
  • Taxed on LOWER-income spouse return

13
Total Income Page 2
  • Eligible Dividends T5 T3 slips
  • now two types of dividends (regular eligible)
  • Each subject to different gross-up rates and
    credits
  • Enter on schedule 4 taxable amount as indicated
    on slip
  • Use guide and worksheet to calculate dividend tax
    credit on Schedule 1 and ON428

14
Total Income Page 2
  • Support Payments - SPOUSE
  • support payments for SPOUSE DEDUCTIBLE to payer
    and taxable to recipient Line 156 and 128
  • Must be court ordered periodic payments
  • Support Payments - CHILD
  • Support payments for CHILD NOT DEDUCTIBLE to
    payer and not taxable to recipient
  • If agreement entered into prior to May 1, 1997,
    then may be deductible to payer and taxable to
    recipient

15
Total Income Page 2
  • Effects of Changes in Marital Status
  • Common-law partner applies if 1) parent of your
    child, and/or 2) living together for 12
    continuous months
  • Year of marriage breakdown you can claim either
    tax credit for spouse (see below) or support
    payments but not both

16
Total Income Page 2
  • Foreign Income
  • Report all income earned in year from all
    sources, i.e. pension from United Kingdom
  • Translated at the average exchange rate
  • See briefing notes for treaty exempt countries
    and exemptions and exchange rates

17
Total Income Page 2
  • US Social Security
  • Canadian residents are taxed on US social
    security received during the year
  • Include 100 of Social Security on line 115 and
    deduct 15 on line 256 (only 85 of amount is
    taxable)

18
Total Income Page 2
  • Split Pension Income (New in 2007)
  • If clients OVER 65 and therefore receiving the
    age amount WILL NOT BE BENEFICIAL AS ALREADY
    NOT TAXABLE TRANSFER NOT NECESSARY
  • This is the majority of Tax Clinic Clients

19
Total Income Page 2
  • Split Pension Income (continued)
  • If clients are under the age of 65 with eligible
    pension income (Line 115), transfer may be
    beneficial
  • IF one spouse has majority of income and the
    other has NO pension income (Line 115), AND
  • IF after entering all information, the client IS
    taxable, may want to split the pension income
  • BOTH clients would need to complete and sign form
    T1032 (bring the forms with you)
  • See Briefing Notes for more details
  • THIS SCENARIO IS NOT LIKELY GIVEN THE INCOME
    CRITERIA AT THE TAX CLINICS

20
Total Income Page 2
  • Split Pension Income (continued)
  • The only other time it may be advisable to split
    income is if after calculating taxable income,
    one spouse has TAXABLE INCOME OVER 20,000
  • In this case, split pension income to eliminate
    the Ontario Health Premium
  • Again you will need to bring the forms (T1032)
    with you and both clients will have to complete
    and sign

21
Total Income Page 2
  • Veterans
  • Veteran disability payments, dependent
    pensioners payments and war veterans allowances
    are not taxable and not included in net income
  • Child Tax Benefit
  • Not taxable do not include
  • Scholarships, bursaries and fellowships
  • Not taxable do not include

22
CALCULATING TAXABLE INCOME Page 3
  • Page 3 of the Jacket
  • Line 250 most important!
  • The rest will likely not apply
  • See next 3 slides

23
TAXABLE Income Page 3
  • Non-Taxable Income enter in calculating net
    income above
  • GIS and SA (line 146)
  • Welfare (line 145)
  • Workers Compensation (line 144)
  • Offsetting deduction in computing taxable income
    (LINE 250)!!!!
  • Affects calculation of tax credits

24
TAXABLE Income Page 3
  • Childcare Deduction
  • Must be claimed by lower income spouse (in most
    cases) using form T778
  • Max claim of 7,000 per child who was not 7 at
    end of year, 4,000 each for other children under
    16 at any time during year, and 10,000 per child
    eligible for Disability Credit (max 2/3 of earned
    income)
  • Limit on camp expenses
  • Single parents in school can claim expenses
    against any source of income

25
TAXABLE Income Page 3
  • RRSP contributions Line 208 (Schedule 7)
  • Union Dues Line 212 (from T4)
  • Support Payments Made Line 220 (see slide above)

26
CALCULATING REFUND OR BALANCE OWING Page 4
  • Page 4 of the Jacket
  • Calculate tax on Schedule 1 (Line 420) and ON428
    (Line 428)
  • Lines 437 476 as applicable
  • LINE 479 PROVINCIAL CREDIT ONE PER COUPLE
    most important form to complete (ON479)

27
CALCULATING TAX - TIP
  • NOTE a time saving tip
  • If taxable income (Line 260) is less than 9,600
    Federal and 8,681 Ontario (basic personal
    amount) you do not need to fill in Schedule 1
    or ON428
  • Just put 0 Line 420-Schedule 1 and Line
    71-ON428
  • This does not apply to new immigrants, because
    credits prorated (see below)

28
NON-refundable tax credits
  • These are NON-refundable
  • Only used to reduce taxes otherwise payable
  • Different amounts available on Schedule 1 (Fed)
    and ON428 (Ont)
  • Once you have enough credits (greater than or
    equal to taxable income) then you do not need to
    claim more
  • See next 13 slides

29
Non-refundable Tax Credits
  • Use worksheets/guide when needed
  • Basic Amount
  • Everyone gets a basic credit of 9,600 (Fed) and
    8,681 (Ont)
  • Spouse/Common Law Amount
  • If the spouse has low income or no income claim
    spouse amount
  • Available credit of 9,600 (Fed) and 7,371 (Ont)

30
Non-refundable Tax Credits
  • Eligible Dependent (Line 305) Schedule 5
  • consider for single, divorced, separated, widowed
    taxpayers
  • Must support dependent who was
  • under 18 at any time or parent, grandparent, or
    physically/mentally infirm
  • Related to taxpayer
  • Living with taxpayer (except dependent children
    at school)
  • Residing in Canada
  • 9,600 (Fed) and 7,371 (Ont)

31
Non-refundable Tax Credits
  • Amount for children born in 1991 or later
  • NEW in 2007
  • 2,038 per child who is under 18 at the end of
    the year
  • Claim the full amount in the year of birth, death
    or adoption
  • Federal only, not provincial credit
  • CPP paid (from all T4s (Line 272)
  • EI paid (from all T4s (Line 212)

32
Non-refundable Tax Credits
  • 65 (born 1943 or earlier)
  • claim age amount 5,276 (Fed) and 4,239 (Ont)
  • Pension Amount
  • receipt of pension income (lines 115,129) - CPP,
    OAS, death benefits not eligible
  • claim pension amount 2,000 (Fed) and 1,201
    (Ont)
  • Transfer Credits to Spouse
  • complete schedule 2
  • Transfer age amount, pension amount, disability
    amount, tuition in certain cases, and amount for
    children born in 1991 or later

33
Non-refundable Tax Credits
  • Canada employment amount Federal Credit
  • 1,019 (Line 363 Sch 1)
  • Available if they have employment income
  • Public Transit Passes Federal Credit
  • Line 364 Sch 1
  • Credit for monthly (or longer) public transit
    passes
  • Or passes for at least 5 days uninterrupted
    travel x 4 (total 20 days purchased within a 28
    day period)
  • Claim for you, your spouse, common-law spouse or
    dependent children under 19

34
Non-refundable Tax Credits
  • Childrens fitness amount
  • NEW in 2007
  • Maximum 500 per year per child for enrolment in
    a program of prescribed physical activity
  • Child must be under 16 at beginning of the year
    or under 18 if disabled
  • Additional 500 available if paid for disabled
    child

35
Non-refundable Tax Credits
  • Disability Credit
  • 6,890 (Fed) 6,910 (Ont) non-refundable tax
    credit
  • plus 4,019 (Fed) 4,031 (Ont) for disabled
    children under 18 yrs
  • Markedly restricted in their daily activities for
    a substantial period of time
  • Must file T2201 if 1st year of claim

36
Non-refundable Tax Credits
  • Infirm Amount Line 306 schedule 5
  • for dependents 18 with mental/physical infirmity
  • for child, grandchild, parent, grandparent,
    brother, sister, aunt, uncle, niece or nephew
    resident in Canada
  • maximum credit 4,095 (Fed) 4,092 (Ont)
  • Dependents net income must be less than 9,906
  • Use worksheet to calculate

37
Non-refundable Tax Credits
  • Caregiver Credit Line 315 schedule 5
  • for dependents 18 with mental/physical infirmity
  • for child, grandchild, parent, grandparent,
    brother, sister, aunt, uncle, niece or nephew
    resident in Canada
  • OR 65 parent or grandparent
  • maximum credit 4,095 (Fed)/4,092 (Ont)
  • Dependents net income must be less than 18,081
  • Use worksheet to calculate
  • NOT available if infirm amount claimed

38
Non-refundable Tax Credits
  • Students Complete Schedule 11
  • Tuition - receipts must be gt100 for tuition
    (T2202A)
  • Education Credit and Textbook credit calculated
    based on FT or PT status (see T2202A)
  • Unused tuition fees and education credit can be
    transferred up to 5,000 (Fed) and 6,003 (Ont)
    to supporting person
  • Students should always complete Schedule 11 even
    if credits not used to keep carryforward
  • Interest paid on Canada Student Loans is eligible
    for a credit (Line 319 Fed only) or
    carryforward 5 years

39
Non-refundable Tax Credits
  • Medical expenses - can claim amounts for
  • Claim entire familys expenses on same return
    eligible amount must be over 3 of net income
  • Can claim for any 12-month period ending in 2008
  • Medical expenses other dependents
  • Claim for expenses paid on behalf of other
    dependent relatives, such as grandparents or
    nieces/nephews, may be claimed on line 331 of
    Schedule 1/liine 5872 of ON428
  • Claim is subject to dependents minimum threshold
    (gt 3 of net income)
  • Maximum claim 10,000 (Fed) and 10,591 (Ont.)

40
Non-refundable Tax Credits
  • Donations claim entire familys donations on
    same return
  • Federal receive credit of 15 on first 200 and
    29 on balance
  • Complete Schedule 9
  • If credit not needed then carryforward up to 5
    years
  • Tell client to keep receipts until needed

41
Non-refundable Tax Credits
  • New Immigrants
  • considered part-time residents from the time they
    enter Canada, i.e. moved to Canada on March 31,
    2008 then resident for 275 days or approximately
    9 months
  • pay tax on all income received since moving to
    Canada, i.e. 9 months
  • Non-refundable credits are pro-rated, i.e.
    275/365
  • Pro-rate the following federal and corresponding
    Ontario amounts Line 300, 301, 303, 305, 367,
    306, 315 to 318.

42
Ontario Health Premium Tax
  • For individuals with TAXABLE income (line 260)
    greater than 20,000
  • Calculated and entered on ON428 Line 70
  • Non-refundable credits listed above are not used
    to reduce
  • Tax Clinic patrons will not likely be subject to
    this premium due to their taxable income level

43
REFUNDABLE CREDITS!!! Page 4
  • Claimed on page 4 of Jacket
  • Unlike non-refundable credits you should ALWAYS
    see if these are available
  • They create refunds for the clients
  • Use separate schedules and worksheets to
    calculate
  • Next 3 slides

44
Ontario Refundable Tax Credits Page 4
  • ON 479 Ontario Credits
  • ALWAYS complete this form (one per family)
  • NEW FOR 2008 Claim Seniors Homeowners Property
    Tax Grant
  • Available for 64 and paid property tax
  • MUST X BOX AT TOP OF ON479 TO GET
  • May get up to 250 mailed separately

45
Ontario Refundable Tax Credits Page 4
  • ON 479 Ontario Credits
  • ALWAYS calculate property tax credit/rent credit
  • ALWAYS calculate sales tax credit (dont forget
    dependents)
  • One per family
  • If 16-18 on Dec 31st and not a dependent or
    living with you can file own claim
  • 65 - Receive higher amounts!!!!

46
Federal Refundable Tax Credit Page 4
  • Refundable Medical Expense Supplement up to
    1,041
  • if eligible for medical expense credit (line 332
    on schedule 1)
  • must have at least 3,040 employment income
  • complete federal worksheet Line 452 to calculate

47
Federal Refundable Tax Credit Page 4
  • Working income tax benefit (WITB)
  • Available if employment or business income over
    18
  • Employment/business income gt 3,000
  • Not for full-time students unless single with
    dependent
  • Complete Schedule 6 and enter results on Line 453
  • One per family - the spouse with the higher
    working income should claim
  • Available if single with income under 13,081 or
    have a spouse/dependent and family income under
    21,569
  • Maximum 510 (single) or 1,019 (with
    dependent)!!!

48
Refund or Balance Owing
  • Calculated on page 4 of Jacket
  • Calculate taxes as per above
  • Calculate credits as per above
  • Dont forget to include taxes withheld at source
    (T4s, etc.) entered on line 437
  • Total payable less total credits results in
    refund or amount owing
  • 99 of clients owe nothing or get a refund
  • Have client sign and date
  • Do not complete tax preparer section

49
GST REBATE
  • GST
  • One claim per family
  • Always complete front page of T1
  • Calculation not done on return calculated by
    CRA
  • Should be available to all Tax Clinic patrons

50
CHILD TAX BENEFIT
  • NOT calculated on return separate department
  • Inform new parents and new immigrants to apply
    for the CTB
  • Forms - www.cra.gc.ca/forms
  • or 1-800-959-2221
  • Enquiries www.cra.gc.ca/benefits
  • or 1-800-387-1193
  • Used to calculate Universal Childcare Benefit

51
HELP!
  • CRA General Help Line
  • 1-800-959-8281
  • Hours
  • 815 a.m. 1000 p.m. (weekdays)
  • 900 a.m. 100 p.m. (weekends)
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