icao volunteer tax clinics 2012 training session for 2011 returns presented by: rita macdonald, ca...

ICAO Volunteer Tax Clinics2012 Training Session for 2011 Returns

Presented by:Rita MacDonald, CARita MacDonald Professional CorporationElements LLPTax Advisory and Compliance

Agenda

Tax Clinic Guidelines

Introduction to the Return

Understanding the Changes to the Ontario Credits

Hypothetical tax return - Problem 1

Hypothetical tax return - Problem 2

Using TaxPrep

Volunteer Tax Clinic Guidelines

Income threshold per household, less than:with no dependents $20,000with dependents $30,000

Exceptions, i.e. disabledNo business income or rental income

Volunteer Tax Clinic Guidelines

Assist in preparing return – likely only for 2011; some clinics may allow 2010 and 2009

Do not associate with false, misleading or incomplete returns

Do not give advice

What To Bring - Taxpayer

Information slips and receiptsPrior year’s tax return and assessmentOther necessary information

Taxpayer responsible for filing return

What To Bring - Volunteer

Calculator, stapler, pens, pencils, etc.Blank paper (for schedules, i.e. list of

medical expenses, donations)T1 guideClinic Briefing NotesExtra blank returnsComputer and printer (if using)

What To Expect

Each location different – know where you are going and arrive early to set up – DON’T FORGET!!

Taxpayer’s have been pre-screened and booked into ½ hour slots (a husband and wife would be 2 returns so 1 hour)

Typically 3 hour clinics so you will be preparing 6 returns Sort the slips by type and review for completeness If taxpayer does not qualify (i.e. business income, over

income threshold), do not complete and bring to the attention of the location coordinator

What to Expect (2)

No where to print (unless you bring your own

printer) so be prepared to complete by hand

Review tax T1 General (tax forms) prior to

attending

May use Taxprep to calculate first

Complete two copies, one signed and in envelope

to CRA and one for taxpayer

Completing the Return

Who must file a return? Everyone!

Which T1 form to use (Special, General)?

Do lower income spouse first

Need details of spouse’s income (if not preparing)

The Income Tax and Benefit Return

4 pages - Otherwise known as “the Jacket”Page 1 – Personal Identification, elections Canada,

GSTPage 2 – Total IncomePage 3 – Deductions from income to get to

Taxable IncomePage 4 – Calculation of Refund or Balance Owing,

Signature

IDENTIFICATION – Page 1

Personal Information – name, address, S.I.N., D.O.B., marital status

Must include spouse’s information (common-law too)

PROVINCE OF RESIDENCE – ONTARIOElections Canada, Question on CitizenshipGST – always answer yes!!!!! (one

per couple/family)

IDENTIFICATION (cont’d) 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 – claim spousal amounts and transfers from spouse, if applicable

– Year of marriage breakdown – you can claim either tax credit for spouse (see below) or support payments but not both

CALCULATING TOTAL INCOME – Page 2

Page 2 of the JacketRecord ALL income hereNext 9 slides

Total Income – Page 2

SLIPS (add together if more than one):T4 – Employment IncomeT4E – Employment InsuranceT5 – Investment IncomeT4(P) – Pension IncomeT4(OAS) – Old Age Security AND Net Federal

SupplementsT5007 – Social Assistance


Universal Child Care Benefit – RC62 slip$100/month/child under the age of 6 (Line 117)Taxed on LOWER-income spouse returnIF you were a single parent on Dec 31, 2011

can include ALL UCCB amounts on eligible dependant’s return

Report on Line 185 of Jacket – page 2Deduct from eligible dependant amount as net

income – Schedule 1 and ON428Taxprep – RC62 – Check Option #2


Support Payments - SPOUSEsupport payments for SPOUSE DEDUCTIBLE to

payer and taxable to recipient – Line 156 and 128Must be court ordered periodic payments

Support Payments - CHILDSupport payments for CHILD NOT DEDUCTIBLE to

payer and not taxable to recipientRules changed May 1, 1997


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


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)

IF started collecting prior to January 1, 1996 may be

eligible for 50% deduction


Veterans

Veteran disability payments, dependent

pensioners’ payments and war veterans

allowances are not taxable and not included in

net income

Canada Child Tax Benefit & Ontario Child Benefit

Not taxable – do not include


Scholarships, Bursaries and Fellowships– FULL-TIME STUDENTS – not taxable if full-time in

current year, previous year or subsequent year– PART-TIME STUDENTS – exemption equal to the

amount of tuition paid plus costs of program-related material

– Taxprep - To calculate exempt portion for part-time students enter tuition fees & costs on Form J130


• Split Pension Income• 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• If in doubt and using Taxprep go to Form T1032 and

use “calculate” button to determine if beneficial


• 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


• 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

CALCULATING TAXABLE INCOME – Page 3

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

TAXABLE Income – Page 3

Non-Taxable Income – entered in calculating net income aboveGIS and SA (line 146)Welfare (line 145)Worker’s Compensation (line 144)

Offsetting deduction in computing taxable income (LINE 250)!!!!

Affects calculation of tax credits


Childcare Deduction

Must be claimed by lower income spouse (in most cases)

using form T778

Only deductible against earned income (in most cases)

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 for overnight camps

Use Jumpcode “Care” to enter in Taxprep


• RRSP contributions – Line 208 (Complete Schedule 7)

• Union Dues – Line 212 (from T4)• Support Payments Made – Line 220 (see

slide above)

CALCULATING REFUND OR BALANCE OWING – Page 4

• Page 4 of the Jacket• Calculate FEDERAL tax on Schedule 1

(Line 420) and ONTARIO tax on ON428 (Line 428)

• Lines 437 – 476 as applicable• LINE 479 – Provincial Credit (see below)

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)• TIP: Once you have enough credits (greater

than or equal to taxable income) then you do not need to claim more

• See next 13 slides

Non-refundable Tax CreditsUse worksheets/guide when needed

Basic AmountEveryone gets a basic credit of $10,527(Fed) and

$9,104 (Ont) Spouse/Common Law Amount

If the spouse has low income or no income claim spouse amount (spouse must still file own return)

Available credit of $10,527(Fed) and $8,503(Ont) less spouse’s net income

Non-refundable Tax Credits

Eligible Dependent (Line 305) – Schedule 5consider for single, divorced, separated, widowed

taxpayersMust support dependent who was

under 18 at any time or parent, grandparent, or physically/mentally infirm

Related to taxpayerLiving with taxpayer (except dependent children at school)Residing in Canada

$10,527 (Fed) and $8,503 (Ont) less net incomeRemember to deduct UCCB, if applicable (see above)


Amount for children born in 1994 or later$2,131 per child who is under 18 at the end of the yearClaim the full amount in the year of birth, death or

adoptionFederal only, not provincial credit

CPP paid (from all T4s (Line 308)

EI paid (from all T4s (Line 312)


65+ (born 1946 or earlier)

claim age amount $6,537 (Fed) and $4,445 (Ont)

Pension Amount receipt of pension income (lines 115, 129) - CPP, OAS,

death benefits not eligible

claim pension amount $2,000 (Fed) and $1,259 (Ont)

Transfer Credits to Spouse (Schedule 2)

Transfer age amount, pension amount, disability

amount, tuition in certain cases


Canada employment amount – Federal Credit $1,065 (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


• Federal Children’s fitness amount (Line 365)– 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


• Federal Children’s art amount (Line 370) - NEW– Maximum $500 per year per child for

enrolment in an artistic, cultural, recreational or developmental program

Does not have to be physical, i.e. tutoring, piano lessons, Girl Guides

– Child must be under 16 at beginning of the year or under 18 if disabled

– Additional $500 available if paid for disabled child


Disability Credit $7,341 (Fed) $7,355 (Ont) non-refundable tax

credit Additional amounts available for disabled

children under 18 yrsMarkedly restricted in their daily activities for a

substantial period of timeMust file T2201 if 1st year of claim


Infirm Amount – Line 306– for dependents 18+ with mental/physical infirmity– for child, grandchild, parent, grandparent, brother,

sister, aunt, uncle, niece or nephew resident in Canada– Dependent’s net income must be less than the threshold

(see guide)– Use worksheet to calculate and complete Schedule 5


Caregiver Credit – Line 315– 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 (not necessarily infirm)– Dependent’s net income must be less than the threshold (see

guide)– Use worksheet to calculate and complete Schedule 5– NOT available if infirm amount claimed


Students - Complete Schedule 11 - TuitionTuition - receipts must be >$100 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 $6,295(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

Non-refundable Tax CreditsMedical expenses

– Claim entire family’s expenses on same return– Eligible amount must be over 3% of net income– Can claim for any 12-month period ending in

2011– List on blank sheet & Include receipts– TIP – check if over 3% of net income and

needed to reduce taxes or claim the refundable medical expense supplement first

Non-refundable Tax CreditsMedical 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 dependent’s minimum threshold (> 3% of net income)

– No maximum (new for 2011)

Non-refundable Tax Credits Donations (Complete Schedule 9)

claim entire family’s donations on same returnFederal receive credit of 15% on first $200 and

29% on balanceIf credit not needed then carryforward up to 5 yearsTell client to keep receipts until needed

Non-refundable Tax Credits New Immigrants

considered part-time residents from the time they enter Canada, i.e. moved to Canada on March 31, 2011 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. Taxprep – enter date of entry for automatic proration

Ontario Health Premium TaxFor individuals with TAXABLE income

(line 260) greater than $20,000Calculated and entered on ON428 – Line 69Non-refundable credits listed above are not

used to reduceTax Clinic patrons will not likely be subject

to this premium due to their taxable income level

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 5 slides

Ontario Refundable Tax Credits

ON BEN – New in 2010 – ONE PER FAMILYALWAYS select box 6118 to claim the OEPTC (Ontario

Energy and Property Tax Credit)ALWAYS Select box 6113 IF age 64 or older and paid

property tax to claim the OSHPTG (Ontario Senior Homeowners’ Property Tax Grant)

Enter rent paid (Line 6110) or property tax paid (Line

6112) or check box (6114) if student in residence in

2011

Complete declaration – Part B

SEE SEPARATE HANDOUT

Ontario Refundable Tax Credits – Page 4

ON 479 – ONE PER FAMILYBIG changes for 2011VERY IMPORTANT – see separate handoutOnly used now to claim refundable credit for

Children’s Activity Tax Credit (next slide)Other credits not typically applicable to Tax Clinic

clients

Ontario Refundable Tax Credits – Page 4

ON 479 – Ontario Chiidren’s Acitivity Tax CreditClaim fitness and art program receipts (same as Federal

– see above)Maximum $509 in eligible expenses (additional $509 if

disabled) per childMaximum refundable credit $51 per year per child or

10% of totalChild must be under 16 at beginning of the year or

under 18 if disabled– Complete Line 6309 of Form ON479 and transfer to

Line 479 of the Jacket

Federal Refundable Tax Credit – Page 4

• Working income tax benefit (WITB) – ONE PER FAMILY – IMPORTANT CREDIT– Available if employment or business income &

over 18– Employment/business income must be > $3,000– Not for full-time students unless single with

dependent– Complete Schedule 6 and enter results on Line

453– Maximum $944 (single) or $1,714 (with

dependent)!!!

Federal Refundable Tax Credit – Page 4

Refundable Medical Expense Supplement – up to $1,089 – Line 452Available if eligible for medical expense credit

(line 332 on schedule 1) (i.e. over the 3% of net income threshold)

must have at least $3,179 employment incomecomplete federal worksheet Line 452 to

calculate

Refund or Balance Owing

• Calculated on page 4 of Jacket• Calculate taxes as per above• Calculate REFUNDABLE credits as per above• Don’t 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 (See separate

handout on Ontario Credits)• Have client sign and date• Do not complete tax preparer section

CHILD TAX BENEFIT & ONTARIO CHILD BENEFIT

NOT calculated on return – apply separately Inform new parents and new immigrants to apply

for the CTB Used to calculate Universal Childcare Benefit

($100/month) Forms - www.cra.gc.ca/forms

or 1-800-959-2221 Enquiries – www.cra.gc.ca/benefits

or 1-800-387-1193

http://www.cra.gc.ca/forms

http://www.cra.gc.ca/benefits%20or%201-800-387-1193

http://www.cra.gc.ca/benefits%20or%201-800-387-1193

HELP!

• CRA General Help Line• 1-800-959-8281

• Hours• 8:15 a.m. – 10:00 p.m. (weekdays)• 9:00 a.m. – 1:00 p.m. (weekends)

icao volunteer tax clinics 2012 training session for 2011 returns presented by: rita macdonald, ca...

Documents

income tax

rental income slide

taxpayer slide

business income

taxable income page

taxprep slide

filing return slide

compliance slide