Tax Flashcards
Other Deductions - Childcare Expenses - Who can deduct
Lower Income Spouse
Unless lower income spouse is:
- In FT or PT education
- Confined to prison for at least 2 weeks
- Infirmed or incapable of caring for children for 2 weeks
- living apart from higher-income earner for at least 90 days and child resides with HIE
Other Deductions - Childcare Expenses - Limitations
All limited to 2/3 taxpayers income
Under 7 - no disabilities
- max 8,000$/ child
- 200$/ week camps/ higher income
7-16 - no disabilities
- max 5,000$/child
- 125$/ week camps higher income
16 over, disability, does not qualify
- max 5,000$/ child
- 125$/ week
Any Age - Disability, qualifies
- 11,000$/ child
- 275$/ week
Other Income - Moving Expenses
- Earn business or employment income
- Attend qualified post-secondary institution
Conditions
- At least 40km closer
- Expenses that exceed income can be carried forward
- Expenses must be paid (not reimbursed)
Other Deductions - Moving Expenses - Qualified
- Traveling Costs
- Transportation/ Storage Costs
- Cost of Meals and Accommodations up to 15 days
- Selling costs of old residence
- Legal Fees and Title Transfer of new home (But not if old home was rented)
- Does not include house hunting
Other Income - Childcare expenses - Calculation
Lesser of
- Amount Paid
- Limit
- 2/3 Income
If Lower Income is exempt for a period - calculate for the High-income Earner (Limit = / week rate) and deduct from lower income deduction
Employee vs Contractor - Main Tests
- Control
- Ownership of Tools
- Economic - Chance of Profit/ Risk of Loss
- Integration in the organization
- Intent of the relationship
Tax Return filing Dates
Employee - April 30
Contractor - June 15
Employment Income
- Salary, Wage, Gratuities
- Bonuses, tips, commissions
- Employee Benefits (incl automobile, stock options)
- Limited Deductions
Business Income (loss)
- Profit (Revenue less expenses incurred to earn income)
- Profession, calling, trade, manufacturer, adventure, or concern in nature of trade
Property Income (loss)
- Interest Income
- Dividend Income
- Rental Income/ Loss
- Royalty Income
Other Income
- Retirement income (pensions, RRSP, CPP)
- Spousal support
- Social assistance
- Workers Compensation
Deductions
- Spousal payments
- moving expenses
- childcare support
- RRSP Contributions
Capital Gains (losses)
- Proceeds of disposition less adjusted cost base
- 50% inclusion rate
Deferred Income Plans - RRSP
- Contribution is deductible
- Earnings not taxed while in plan
Limits
- 18% previous year earned income
and current year deduction limit (26,230)
- Contribution room is not regained after withdrawl except with buy plan or lifelong learning plan
RRSP - Pension Adjustment
Past service reduces deduction limit
Reversal increases deduction limit
Deferred Income Plans - TFSA
- Contribution not deductible
- Earnings not taxed
- Limits = 5,500/ year
- Contribution room recovered at start of calendar year after withdrawl
Deferred Income - RESP
- Contribution not deductible
- Not taxed while in plan
- Lifetime limit = 50,000 per beneficiary
Gov grants up to 20% of contributions max 500$ in a year until child turns 17
RRSP - Home buyers movie
- must be for a home
- Cannot have owned a home for prior 4 calendar years
- repayment over 15 years
RRSP - Lifelong Learning
- Designated institution
- Individual or spouse can withdrawl
- 10,000 per year max 20,000
- repayment over 10 years starting in 5th year unless withdraw from school earlier
Taxes - Residency
Residents - Taxed on worldwide income for the year
Part-year Resident - taxed on worldwide income for part of the year
Non-resident - taxed on Canadian source income
Taxes - Residency - Determining criteria for individuals
Primary
- Dwelling place in Canada is maintained
- Spouse in Canada
- Dependents in Canada
Secondary
- Personal Property kept in Canada
- Social or Other Ties
- Economic Ties
Taxes - Residency - Sojourning
Not factually a resident but in Canada for more than 182 days (at least 183 days)
Taxes - Residency - Sojourning
Central management and Control where board meets to make decisions
Tax Administration - Filing Dates
Individual
- April 30
- June 15 - taxpayer of spouse carries a business (not self employed)
Corporation
- 6 months after year end
Tax Administration - Filing Dates - Deceased
Later of
1) regular deadline
2) 6 months after date of death
Tax Admin - Notice of Assessment - Appeal Dates
File an objection within 90 days of deadline
1 year from tax return filing deadline
Tax Admin - Calculate Tax Installments
Lower of
- 1/4 * current year
- 1/4 * immediate prior
- 1/4 * second prior
- 1/2 (immediate prior - 2* second prior)
for corporation 1/2 1/2 1/2 1/10
Employment Income - Home Office Expense
Can only be used to reduce business income, not employment income
Employment Income - Meals & Entertainment
Cannot reduce employment income unless individual receives commissions
Employment Income - Stock Options - CCPC
No taxable benefit on purchase if company is a CCPC
Benefits on purchase are recognized when shares are sold
Property Income - Claiming CCA
Lower of:
- UCC * CAA rate (4% for buildings
- Gain from Rev-Exp
Cannot have a loss from rental property
Interest & Penalties - Missed Payment Deadline
Interest Rate + 4%
Compounded daily from May 1 until amount is paid
Interest & Penalties - Failure to file return
First Time:
5% * total unpaid
1% * total unpaid * no. months outstanding (no more than 12)
Subsequent
10% * unpaid
2% * total unpaid *no. months outstanding (no more than 12)
Interest & Penalties - False Statement and Omissions
greater of
100%
50% understated tax
Interest & Penalties - Misrepresentation
Greater of
1,000$
50% tax sought to be avoided
What is CCA
Annual deduction for the cost of appreciable capital assets used to earn income is allowed for tax purposes
- Cannot be claimed until asset is available for use
UCC Calculation
Beginning UCC \+ Additions - Disposals - 1/2 Year Rule = Base for CCA - CCA Claimed \+ 1/2 Year Rule = UCC Balance
Where
Disposals = lesser of proceeds - cost and original cost
1/2 year rule = if Additions > disposals
Why do we use Recapture/ Terminal Loss
Over time deducts no more or less than net out-of-pocket costs for the asset
Recapture = Additions < Disposals
-ve UCC balance
Claimed too much CCA
Terminal Loss = Additions > Disposals \+ve UCC Balance Ddid not claim emough deducted from UCC to arrive at nil balance deducted from Net Income
CCA - Limited-Life Intangibles
Trademarks/ Licences
Acquisition = (cost/legal life) * (days remaining/ total days)
Subsequent = cost/ legal life
CCA - Sale of land and building
Terminal Loss > Capital Gain
- Reduce TL and deduct from NI for tax purposes
Capital Gain > Terminal Loss
- reduce CG and include 50% of remaining in net income for tax purposes
Personal Div C Deductions
Deductions for - Northern residents (6 months) - lifetime capital gains deduction - loss carryovers - Employee Stock Options = 50% * # shares * (SP-EP)
