Module 1- The Canadian Tax System

Question 1

Who must file a return

Answer 1

• if you owe taxes
• have earnings subject to CPP (incl self emp.)
• CRA request letter
• RRSP withdrawals
• Sold investments
• claimed a reserve

Question 2

Why you should file a return

Answer 2

• expecting a refund (money)
• entitled to refundable tax credits
• benefit entitlement
• income for RESO purposes
• you have a loss to claim - can carry back/fwd
• tuition credits (students) - can carry forward

Question 3

Tax filing deadlines

Answer 3

Individuals: April 30

Self employed: June 15 (incl spouse)
Payments due April 30 (before deadline)

Deceased :
Later of:
1. Apr 30
2. 6 months after death

Trusts :
99 days after year end of the trust

Question 4

Late filling penalties

Answer 4

1st time:
- 5 % of balance + 1% of balance each Mth (max 12 mths)= 17% + interest

2nd time :
- 10 % of balance + 2% of balance each mth (max 20 mths) = 50% + interest

Question 5

Instalment payments

Answer 5

-paid quarterly:
March 15
June 
September 
December 

• typically applies to self employed individuals , investors, etc…

Question 6

Marginal tax rate system

Answer 6

Tax brackets :

• see page 2 of schedule 1:
  1. 45,916 or less = 15%
  2. 45,916-91,831 = 22%
  3. 91,831-142,353= 26%
  4. 142,353- 202,800=29%
  5. 202,800 or more = 33%

Rates increase each year with inflation

Question 7

Tax deduction vs Tax credit

Answer 7

Deduction: deducted from TOTAL INCOME to get TAXABLE INCOME (not money back)

• based in marginal tax rate
• I.e RESP, union/professional dues , moving expenses , childcare exp.)

Credits: at lowest tax bracket, same for everyone regardless of income

• MAY get money back
• 2 types: refundable, non refundable
• I.e: basic personal amount , age credit, tuition credit

Question 8

Tax credit: NON refundable

Answer 8

• most common
• brings federal/provincial tax to 0 only
• if goes below 0- NOT a refund/benefit , any is lost

Question 9

Tax credit: refundable

Answer 9

• increase amount of refund/lowers income (money back!!!)

- not common