Understanding Personal Tax

Presented by Patty Auger, CPA, CA, CFP

Patty Auger Consulting

Books and records

Personal tax records must be kept for 6 years from the date of filing! EXCEPT…..information relating to long-term transactions such as investments and capital properties until sold or disposed of and/or until a notice of objection or appeal is completed and time for further appeal has expired

Filing deadline…….

April 30th…..or is it….

June 15th?

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%

Understanding taxes payable

INCOMElessDEDUCTIONSequalsTAXABLE INCOMEapply graduated tax ratesCALCULATED TAXES

CALCULATED TAXESlessCREDITSequalsTAXES PAYABLE

Deductions

Reduce income by 100% of amount incurred- RRSP contributions (contribution limit; do not have to deduct in year of contribution)- union or professional dues- child care expenses (limit; T778)- moving expenses (>= 40km)- spousal support payments made- carrying charges and interest expenses- employment expenses

Credits

In most cases, USE THEM OR LOSE THEM- reduce taxes payable by 15% of amount calculated except donations- Amount for Eligible Dependent (if no spouse)- Family caregiver amount (for children<18)- Volunteer Firefighter / Search & Rescue Volunteer- Public transit (monthly or annual passes)- Children’s fitness amount – refundable, $1,000 per child- Children’s arts amount – $500 per child- New home buyer’s amount - $5,000- Adoption expenses - $15,255- Caregiver amount (dependent > 18 years, net income < $20,343,

physical/mental impairment)

Credits

In most cases, USE THEM OR LOSE THEM- reduce taxes payable by 15% of amount calculated except donations- Student loan interest- Tuition, education and textbook amounts (Schedule 11);

maximum $5,000 transfer per child to parent- Medical expenses - > 3% of income before deductions or $2,208- Charitable Donations – 15% of first $200, 29% of all others (do

not have to claim in year donated; can carryforward)- 1st time donor – extra 25% upto $1,000 (2013-2017)

Other Credits

- political donations- Family Tax Cut (Schedule 1A) – maximum $2,000 reduction from taxes payable

Once you’ve filed your return…..

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

Tools Available

Canada Revenue Agencyo Website - http://www.cra-arc.gc.cao General Income tax and benefit guide – excellent resource!!o Free preparation software

Federal Tax Rates

2015 2016 Rate Income Rate IncomeFirst bracket 15% $0 - $44,701 15% $0 - $45,282 Second bracket 22% $44,702 - $89,401 20.50% $45,283 - $90,563 Third bracket 26% $89,402 - $138,586 26% $90,564 - $140,388 Fourth bracket 29% $138,587 and up 29% $140,389 - $200,000 Fifth bracket NA 33% $200,000 and up

Alberta Tax Rates

2015 2016 Rate Income Rate IncomeFirst bracket 10.00% $0 - $125,000 10.00% $0 - $125,000 Second bracket 10.50% $125,001 - $150,000 12.00% $125,001 - $150,000 Third bracket 10.75% $150,001 - $200,000 13.00% $150,001 - $200,000 Fourth bracket 11.00% $200,001 - $300,000 14.00% $200,001 - $300,000 Fifth bracket 11.25% $300,001 and up 15.00% $300,001 and up

Combined Tax Rates2015 2016

Rate Income Rate Income25.00% $0 - $44,701 25.00% $0 - $45,282 32.00% $44,702 - $89,401 30.50% $45,283 - $90,563 36.00% $89,402 - $125,000 36.00% $90,564 - $125,000 36.50% $125,001 - $138,586 38.00% $125,001 - $140,388 39.50% $138,586 - $150,000 41.00% $138,586 - $150,000 39.75% $150,001 - $200,000 42.00% $150,001 - $200,000 40.00% $200,001 - $300,000 43.00% $200,001 - $300,000 40.25% $300,001 and up 44.00% $300,001 and up

Impact of New Rates

Income Estimated Taxes (before credits) 2015 2016 Impact $75,000 $ 16,326 $ 15,769 (557) $150,000 $ 43,217 $ 42,701 (516) $300,000 $ 103,092 $ 110,702 7,610 $450,000 $ 163,467 $ 182,702 19,235

Questions?