2015 AFSA Tax Clinic Training. Table of Contents Who receives/collects income taxes? Differences...

2015 AFSA Tax Clinic Training

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

Who Receives Income Taxes? Federal government Provincial government

Who Collects Income Taxes? Canada Revenue Agency (CRA) Administers federal and provincial tax law One tax return for both federal/provincial taxes

Differences between Provinces Tax Rates Credits We will be looking only at Ontario credits Filing methods

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

Why File a Tax Return? Refundable Credits Refund of overpaid tax Encourages people to file a tax return

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

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

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

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

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

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

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

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

Payment Rare for our clients Both methods (EFILE/Paper) Pay online via their bank Pay at a teller at their bank Cheque

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

St. Jacobs, ON

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

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)

Examples of Deductions RRSP Contributions Union Dues Professional Dues (e.g. CPAO) Child Care Expenses Moving Expenses

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

Credits Reduces taxes payable dollar for dollar More valuable than deductions Also used to encourage certain behaviour Refundable vs. non-refundable credits

Examples of Credits HST/GST Tax Credit Ontario Energy and Property Tax Credit (OEPTC) Tuition Tax Credit Basic Personal Credit

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!

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

Lake Erie, ON

Step 1 Open Ufile Follow along as we navigate through the next steps

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

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

Step 2: Interview - Identification Marital Status Single Common-Law Married Widowed Divorced Separated

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

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

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.

Step 2: Interview CRA Questions Tick this box if [] Very important! Dont miss it!

Step 2: Interview Interview Setup Sets up all the future screens you will look through later to enter information Skip for now!

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

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

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

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

Step 2: EFILE Leave as default

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)

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

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)

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

Im just hungry.

INCOME! HORRIBLY MISTITLED!

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

Interview Setup - Income Pension Income (and other income) T4AOAS

Interview Setup - Income Pension Income (and other income) T4AP

Interview Setup - Income Pension Income (and other income) T4A (Other Income)

Interview Setup - Income Pension Income (and other income) T4A (Scholarship Income)

Interview Setup - Income Universal Child Care Benefits RC-62 Slip (from government)

Interview Setup - Income T3 Trust Income

Interview Setup - Income T5 Investment Income

Interview Setup - Income Other things on the Investment Page: T4PS Employee Profit-Sharing Plan Carrying Charges Safety Deposit Box fees

Interview Setup - Income T5013 Partnership Income Full-page slip You will 99% sure not see this

Interview Setup - Income T5007 Statement of Benefits

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

Knight Family Case Case 2!

What Winters Supposed to Look Like

Deductions and Credits

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

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

RRSP Contributions Overcontribution First $2,000 over limit is ok no penalty Will probably be some warning bells if over, talk to us!

RRSP Contributions All receipts look different, here is TD

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

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

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

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

Medical Expenses Things people will bring University Health/Dental Insurance

Medical Expenses

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.

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)

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

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!

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

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!)

Charitable Donation Receipts Other Donation Cases US donations Prescribed universities outside of Canada

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

Tuition Receipt T2202A

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

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

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.

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

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

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)

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

Waterloo, ON

Other Specific Things!

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

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))

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

FEDS UPASS Download and fill in receipt from FEDS site http://www.feds.ca/about/upass/

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.

Monthly Transit Passes They need to the transit pass in case CRA asks! We dont need to see it, but you can ask

Home Buyers Amount Very very very unlikely to come up Ask us

Richmond Hill, ON

Ontario Credits Property Tax Rent Residence MUST click this!!!

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!!!!

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

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

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

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

Lots of Cases Lets do a lot of cases. Itll be fun. :)

Eugenia, ON

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

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

2015 AFSA Tax Clinic Training. Table of Contents Who receives/collects income taxes? Differences...

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