Transcript of 2015 AFSA Tax Clinic Training. Table of Contents Who receives/collects income taxes? Differences...
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- 2015 AFSA Tax Clinic Training
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- Table of Contents Who receives/collects income taxes?
Differences between provinces Filing a tax return Why file a tax
return? Preparing tax returns EFILE Paper File
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- Who Receives Income Taxes? Federal government Provincial
government
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- Who Collects Income Taxes? Canada Revenue Agency (CRA)
Administers federal and provincial tax law One tax return for both
federal/provincial taxes
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- Differences between Provinces Tax Rates Credits We will be
looking only at Ontario credits Filing methods
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- Filing a Tax Return Annual Due April 30 Multiple ways to file:
NETFILE Taxpayer does own return; files online EFILE Third-party
prepares return and files online Paper file Mail return to the
CRA
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- Why File a Tax Return? Refundable Credits Refund of overpaid
tax Encourages people to file a tax return
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- Preparing Tax Returns We will use a program called Ufile Ufile
vs. EFILE Ufile (noun) Program to prepare tax returns EFILE (verb)
Method that allows third-party to electronically file a clients tax
return We will use Ufile to both EFILE and prepare paper
returns
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- EFILE STEPS: 1. Prepare return using Ufile 2. EFILE return
Sends all necessary information to CRA Taxpayer does not have to
mail anything, but must keep all records for 6 years Return
(refund) processed faster 3. Give PDF copy of return to client via
USB/email
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- Who cant EFILE? The taxpayer is a deemed resident (not subject
to provincial or territorial tax) The taxpayer died prior to the
current tax year The taxpayer's social insurance number begins with
0 The taxpayer is filing for bankruptcy
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- Who else cant EFILE? The taxpayer is an emigrant or a
non-resident (international students) The taxpayer's address is
outside Canada The taxpayer is subject to provincial/territorial
income tax in more than one jurisdiction The taxpayer is claiming a
disability amount for themselves, or for their spouse, common-law
partner, or dependent
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- Paper File STEPS: Prepare return using Ufile Give PDF copy of
return to client via USB/email Taxpayer prints at home Taxpayer
attaches required slips and receipts and mails the return There is
a page in the PDF that says what pages to mail, and what order to
put them in
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- Eligible Taxpayers We can only prepare tax returns for eligible
taxpayers Use the maximum income levels shown in the following
table to determine eligibility Taxpayer StatusFamily Income Single
personUp to $30,000 CoupleUp to $40,000 One adult with one child Up
to $35,000
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- Who We Can Prepare Returns For Aboriginal peoples Social
assistance recipients Newcomers to Canada Seniors Students
http://www.cra-arc.gc.ca/tx/ndvdls/vlntr/nd-eng.html
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- Who We Cant Prepare Returns For DO NOT prepare returns for
individuals who: Have self-employment income Have business or
rental income and expenses Have capital gains or losses
(disposition of marketable securities) Have employment expenses
File for bankruptcy Deceased in the year Interest income over
$1,000 http://www.cra-arc.gc.ca/tx/ndvdls/vlntr/nd-eng.html
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- Payment Rare for our clients Both methods (EFILE/Paper) Pay
online via their bank Pay at a teller at their bank Cheque
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- Mailing Address Waterloo residents: Summerside Tax Centre 275
Pope Road Summerside, PE, C1N 6A2 Toronto residents: Canada Revenue
Agency Tax Centre 1050 Notre Dame Avenue Sudbury, ON, P3A 5C2
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- St. Jacobs, ON
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- Steps in Calculating Taxes Payable/Refund Total Income
(Employment income, scholarships) Less: Deductions = Taxable Income
Tax Payable (@ federal and provincial rates) Less: Tax Credits =
Taxes Payable/Refund
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- Deductions Government allows specific deductions to your total
income Reduces taxable income (pay less tax) Result from taxpayer
incurring expenses Used to encourage certain behaviours such as
saving money for retirement (e.g. RRSP)
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- Examples of Deductions RRSP Contributions Union Dues
Professional Dues (e.g. CPAO) Child Care Expenses Moving
Expenses
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- Taxes Payable Based on graduated tax rates Tax rate affects how
much tax you pay The higher the tax rate, the higher the taxes
paid
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- Credits Reduces taxes payable dollar for dollar More valuable
than deductions Also used to encourage certain behaviour Refundable
vs. non-refundable credits
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- Examples of Credits HST/GST Tax Credit Ontario Energy and
Property Tax Credit (OEPTC) Tuition Tax Credit Basic Personal
Credit
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- Refund/Balance Owing Represents how much tax the client has to
pay to the CPA or what the client will get back from the CRA The
only line that your client cares about!
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- Common Misconceptions Deductions vs. Credit Deductions reduce
taxable income Used to calculate taxes payable Credits reduce taxes
payable (tax liability) Ufile vs. EFILE Ufile program used to
prepare returns EFILE method used to electronically file Tax
Preparation vs. Tax Planning Backward-looking vs.
forward-looking
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- Lake Erie, ON
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- Step 1 Open Ufile Follow along as we navigate through the next
steps
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- Step 2: Interview - Identification Identification Fill in all
personal information SIN can be found on Notice of Assessment, any
income slips (e.g. T4), last years tax return, etc. If program says
SIN is invalid, check again Program is always right, because there
is an algorithm to determine if a SIN is valid or not
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- Step 2: Interview - Identification Province of Residence Think
of this as where did you have a place to stay on Dec 31, 2014
Generally Ontario
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- Step 2: Interview - Identification Marital Status Single
Common-Law Married Widowed Divorced Separated
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- Step 2: Interview - Identification Marital Status Single
Common-Law Married Widowed Divorced Separated
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- Step 2: Interview CRA Questions Are you filing an income tax
return for the first time? This is an EFILE exclusion! Do you wish
to apply for the GST/HST Credit Single: Yes Married/Common-Law:
Only one person should claim, doesnt matter which
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- Step 2: Interview CRA Questions Do you own foreign property
over $100,000? Should be no But, ensure you ask this liability
issues! Major penalties if unreported Measurement: Cost >
$100,000 Investment property such as shares, rental property, etc.
Not personal-use cottage
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- Step 2: Interview CRA Questions Authorize the CRA to [] You can
ask the client Simply allows Election Canada to update their voters
list Students can still vote in whatever jurisdiction they reside
in, just need to show up at polling station with proof of residence
Therefore, not a big issue yes or no.
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- Step 2: Interview CRA Questions Tick this box if [] Very
important! Dont miss it!
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- Step 2: Interview Interview Setup Sets up all the future
screens you will look through later to enter information Skip for
now!
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- Step 2: Interview Current Address Mailing Address Suggest using
parents address CRA can mail out of country for international
students CRA will mail private information to the chosen address
Cannot be changed using EFILE
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- Step 2: Interview Current Address Is your home address the same
as your mailing address? Home address is the place where you are
currently living Mailing address is where you want important
documents to go This may be where you are currently living or where
your parents are living, or both
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- Step 2: Interview Controls Additional CPP Contributions
(unlikely) If they received tips, you can ask them if they want to
pay CPP on the tips CPP: You contribute to it, and receive benefit
when you retire or are disabled The more you contribute, the more
you receive later Please ask us for help if you dont feel
comfortable explaining CPP
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- Step 2: Interview Controls CPT30 Election 65 70 years of age,
can elect to stop contributing to CPP Must have already made
election (for our purposes), if they didnt and are still
contributing, too bad! We are not in a position to advise making or
not making the election too many factors to consider
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- Step 2: EFILE Leave as default
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- Step 2: Employment Income T4 Enter all boxes listed (leave
blank if 0) Tips Waiters/waitresses must declare tips received as
income Other Employment Income DO NOT USE Except for international
students foreign employment income (convert to $CAD)
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- Super Easy Example tinyurl.com/allthosedocs Ms. Jennifer Jones
(curling gold medallist) Also lawyer at National Bank Date of
birth: July 7, 1974 SIN: 535 353 585 Home and Mailing Address: 1
Regal Ave, Waterloo, ON, N2L3G1 Single Lives in parents basement
(no property tax or rent!) See link for T4:
tinyurl.com/allthosedocs
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- Post-preparation Tell client how much they owe only after you
are sure all the information is correct Ask for help if you are
unsure of any amounts! Have client fill in TIS60 form, and sign
Section 1 If and only if the return was EFILEd, then you and the
client must sign Section 2 If paper file, tell them to sign the
bottom of the Jacket (the page with the balance owing/owed)
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- Post-preparation Put return onto USB or email return to client
We may provide you with a short summary that you can use that you
should edit as appropriate Tell them how much they will receive
under HST Credit and Ontario Trillium Benefit Bottom of GST Credit
Calculation page Bottom of Ont trillium calculation p2 Should
mention that this is not part of the balance owing/refund
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- Im just hungry.
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- INCOME! HORRIBLY MISTITLED!
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- Interview Setup - Income I had no income from any source Wont
let you proceed if you dont check a box in the list, so choose the
first box if no income
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- Interview Setup - Income Pension Income (and other income)
T4AOAS
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- Interview Setup - Income Pension Income (and other income)
T4AP
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- Interview Setup - Income Pension Income (and other income) T4A
(Other Income)
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- Interview Setup - Income Pension Income (and other income) T4A
(Scholarship Income)
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- Interview Setup - Income Universal Child Care Benefits RC-62
Slip (from government)
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- Interview Setup - Income T3 Trust Income
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- Interview Setup - Income T5 Investment Income
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- Interview Setup - Income Other things on the Investment Page:
T4PS Employee Profit-Sharing Plan Carrying Charges Safety Deposit
Box fees
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- Interview Setup - Income T5013 Partnership Income Full-page
slip You will 99% sure not see this
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- Interview Setup - Income T5007 Statement of Benefits
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- Interview Setup - Income Alimony or Support Payments No slip,
this will probably be in a separation agreement or other legal
document We dont need to see any documentation Take their word
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- Knight Family Case Case 2!
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- What Winters Supposed to Look Like
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- Deductions and Credits
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- RRSP Contributions (Deduction) What is an RRSP? Designed by the
government to encourage retirement savings! Deduction now, taxed on
withdrawal (presumably when youre retired) RRSP Contribution Limit
Generated by employment income Carries forward if not contributed
Get last years carryforward from Notice of Assessment (best) or
last years tax return
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- RRSP Contributions Financial Institution will give you an RRSP
Contribution Receipt Contributions will be divided between: First
60 days of 2015 Remainder of the 2014 year Can also contribute to
spouses RRSP Use your contribution room When spouse withdraws a
long time from now, taxed in their hands
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- RRSP Contributions Overcontribution First $2,000 over limit is
ok no penalty Will probably be some warning bells if over, talk to
us!
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- RRSP Contributions All receipts look different, here is TD
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- Should I Input that Medical? Born before 1996 ParentsClaim Yes
No Pays no Net Federal Tax (ie. Jacket Pg4) Ask a Tax Mentor
Calculate: Total Medical 3% * Net Income Big Number (>$50) No
Unsure Do not Claim Has Cdn Parents Yes No Yes Zero or negative If
Unsure how to do this step, just enter it UNLESS its a big stack of
receipts
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- Medical Expenses (Credit) Generally not worth the effort Need
to have tax payable to have effect Credit received reduced by 3% of
net income Quickly estimate 3% of net income If medical expenses
are below or only slightly over that amount, dont bother Ask us if
you want some judgement help
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- Medical Expenses Only certain medical expenses are eligible In
general, most things sensible count Prescriptions, Dental,
Optometry But, no over-the-counter drugs (i.e. does not require a
prescription) Check list here:
http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/ncm-
tx/rtrn/cmpltng/ddctns/lns300-350/330/llwbl-eng.html
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- Medical Expenses Timeframe Can claim any date range of 365 days
that ends in 2014 Client might have more medical expenses from Mar
20, 2013 to Mar 19, 2014 Cant claim medical expense twice
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- Medical Expenses Things people will bring University
Health/Dental Insurance
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- Medical Expenses
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- Definitely transfer to parents if student is born in 1996 or
later Otherwise, transfer only if: Medical expenses >3% childs
net income E.g. 0 income, definitely transfer! How do you transfer?
Get the child to give the receipt to parents. No further action
required.
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- Political Contributions Not the same as charitable
contributions Need to mail in receipt with return if paper file
Represents donation to Federal, Provincial or Municipal candidate
(or party)
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- Should I Claim that Donation? Have they donated previously in
2007-2012? Claim ADVISE not to claim & Explain Why! Yes No
Eligible for FDSC Ask a Tax Mentor Is the total amount of donations
significant? No Do they owe taxes? (i.e. Net Federal Tax on Jacket
Pg4 > $0) Yes & No Yes Unsure
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- Charitable Donation Receipts Charity receipts will have certain
identifying marks Registered Charity xxxxx xxxx RR 0001 Need to
mail in receipt to CRA if paper file PREVIOUSLY, Id say to always
claim Can carryforward for 5 years Changes in 2013!
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- Charitable Donation Receipts Eligible for the First-Time Donor
Super-Credit (FDSC)? Did not claim a donation on all tax returns
between 2007- 2012 What is FDSC? Non-refundable Tax Credit (BONUS
25%! In addition to normal 15%) Does not carryforward
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- Charitable Donation Receipts FDSC Decision Time Do not claim
donations for anyone who will not be able to use credit, that is
Did not claim donations in the previous 5 tax years (i.e. eligible
for FDSC) Either Has no taxes payable Has taxes payable, but has
tuition credits to carryforward Goal is to preserve students
ability to claim donation credit in the future, since it is
valuable (up to $250 in cash!)
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- Charitable Donation Receipts Other Donation Cases US donations
Prescribed universities outside of Canada
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- Tuition Receipt T2202A Always enter! Tuition, Education and
Textbook CREDITS are all generated from this slip Education and
textbook amounts are calculated on a per-month of study basis Dont
need to know how much you actually spent on textbooks Dont need to
mail in slip if paper file
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- Tuition Receipt T2202A
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- Unused amounts are carried forward Best way is to get from
notice of assessment (it will be in a bunch of paragraphs) Excerpt:
Otherwise, last year tax return, see Schedule 11
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- Tuition Receipt T2202A Even better than carryforward is
transfer to parents Action IS required in order to transfer to
parents From the drop-down list, choose Transfer to parent not
processed Leave fields below that blank
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- Interest paid on Student Loans If you have to take a student
loan out to fund your post- secondary studies, the interest
payments are deductible Would normally receive a statement that
explicitly mentions the deductible portion for tax purposes Only
deductible if the student loan is from the government.
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- Union/Professional Dues (Deduction) Union dues normally already
recorded on T4 Professional dues (e.g. CPA Ontario) are usually not
recorded on T4 Dont need to mail in receipt if paper file
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- Moving Expenses (Deduction) Rare Moving closer to school Can
only deduct against taxable scholarships, bursaries, etc. Most
likely NO! Moving closer to work Moving from Waterloo -> Toronto
to your parents house counts
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- Moving Expenses Choose Simplified Method unless either: They
flew there, or All of: They have receipts The total of receipts is
more than simplified method Simplified method quick calculation
$0.55 / km travelled, + $17 / meal while travelling (max 3
meals/day)
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- Childcare Expenses (Deduction) Create a family member for the
child and enter on childs interview Eligible examples: Caregivers
providing child care services; Day nursery schools and daycare
centres; Educational institutions, for the part of the fees that
relate to child care services; (private schools) Day camps and day
sports schools where the primary goal of the camp is to care for
children (aka summer camp); or Boarding schools, overnight sports
schools, or camps where lodging is involved
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- Waterloo, ON
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- Other Specific Things!
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- Transit Pass Flowchart Are they under 19 on Dec 31, 2014?
Parents: Tell Client to give receipt to parents to claim on their
tax return Claim Yes No Has Income? No Do not Claim Yes Has Cdn
Parents? Yes No
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- Transit Pass Amounts (Credit) Only useful if there is tax
payable! Dont need to submit with paper file Sometimes, already
listed on T4 (e.g. if provided by employer), dont enter again Lots
of sources PRESTO card FEDs UPASS (all undergrad students) GSA
UPASS (all graduate students) Other Local transit (e.g. York Region
Transit (YRT), Toronto Transit Commission (TTC))
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- Transit Pass Amounts Should be transferred to parent if: Under
19 years of age at Dec 31, 2014 If Transfer to Parent: Tell them to
give receipt to parents to claim on their tax return Do not claim
on students return
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- FEDS UPASS Download and fill in receipt from FEDS site
http://www.feds.ca/about/upass/
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- PRESTO Statement You can claim the cost of any 32 or more
one-way trips: Taken on a single transit agency, and During an
uninterrupted period of 31 days or less.
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- Monthly Transit Passes They need to the transit pass in case
CRA asks! We dont need to see it, but you can ask
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- Home Buyers Amount Very very very unlikely to come up Ask
us
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- Richmond Hill, ON
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- Ontario Credits Property Tax Rent Residence MUST click
this!!!
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- ON-BEN Application for [] Fill in the yes on the second
drop-down where it says Applying for the 2014 Ont. energy and
property tax credit Will not receive credit if you dont fill this
out!!!!
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- Ontario Energy and Property Tax Credit (OEPTC) Residence Dont
need receipt Dont need amounts paid Client will get $25 paid out
separately from tax return
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- Ontario Energy and Property Tax Credit (OEPTC) Rent / Sublet We
dont need receipt, not needed to file return CRA usually asks for
this info, receipt from landlord or cheque copy from bank usually
work Client can get LOTS of money back from the OEPTC
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- Ontario Energy and Property Tax Credit (OEPTC) Property Tax We
dont need receipt, not needed to file return, just the amount Need
the actual amount required (for Toronto, these come out halfway
through the year I *think*), NOT the estimates that they give at
the start of the year If you do see a document, there will be a
VERY clear line that says total property tax for 2013
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- Fitness/Arts Credit Go to the childs interview and enter
information there Claim up to $535 (for Ontarians) in Fitness $500
in Arts Dont need to submit receipts
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- Lots of Cases Lets do a lot of cases. Itll be fun. :)
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- Eugenia, ON
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- Important Note Macs (and Linux) Not supported Very few
companies develop tax software for Macs (no supply) Virtually no
tax preparers use Macs (no demand) Software Ufile Used by consumers
Taxprep Used by professional accounting firms
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- Important Note Protect your hardware! Spyware, keyloggers, etc.
Dress well No torn jeans, offensive logos/words/etc. Representing
AFSA and UW As aspiring professionals, ethics is important Ethical
is fact and appearance
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