The Canadian Income Tax System INTERNATIONAL STUDENTS PRESENTATION

Agenda 1.Introduction & Basics of Canadian Taxation 2.What if you don’t pay? 3.Residency Information? 4.Calculation of Taxes? 5.Tax benefits + required resources

Who we are? Lucas Morgan - Coordinator Catalina Montana - Coordinator Jason Rodrigues - Coordinator Nicholas Kirkton – Assistant Coordinator John-Mark Labonte – Assistant Coordinator Alexander Fox – Assistant Coordinator University of Ontario Accounting Association UOAA Tax Clinic

In broad terms…. The Canadian Governments collect money from individuals and companies to help pay for government programs such as: -Roads -Libraries -Schools -Healthcare -Public utilities The Canadian Governments collect money from individuals and companies to help pay for government programs such as: -Roads -Libraries -Schools -Healthcare -Public utilities

How is tax collected? In Canada, there are many different types of income that the government collects from. The most common are: Employment Income Capital Gains – The sale of property Sales Taxes Property Taxes Investment Income Each year, people who are Canadian residents for tax purposes complete an income tax returnCanadian residents for tax purposes Who and How is tax Collected: Deadline: Personal Tax filing deadline is April 30 th, 2016 for the calendar year 2015 year

Consequences of not paying taxes Interesting fact: Al Capone got sent to jail for Tax evasion. Pay a penalty fee Pay interest Get notices about payments Depletes credit score Jail sentences from three months to 16 months, with fines of up to $189,796.

Items needed before filing tax return ONE of the following: Resident: Social Insurance Number (SIN)- Required to work and obtain benefits in Canada. For information and application go to Individual Tax Number (ITN)- This is used only by non-residents and international students. Form T1261, application for a Canadian ITN for non- residents. Temporary Taxation Number (TTN)- This is for residents who are not entitled to an SIN nor ITN but are required to file a return. This is issued once a tax return has been sent in with an explanation as to why they are not eligible for an SIN.

Residency Status of International Students (for tax purposes) Your immigration residency status is Temporary Resident (student) but your residency status for tax purposes is different. International students studying in Canada are considered to be one of the following types of residents: 1. Resident (includes students who reside in Canada only part of the year) 2. Non-resident 3. Deemed resident 4. Deemed non-resident.

Resident -You establish significant residential ties in Canada  You are taxed on worldwide income for the time you are considered a resident * Non-Resident -You do not establish significant residential ties with Canada -You stay in Canada for less than 183 days during the year. (doesn’t have to be consecutive)  You are only taxed on taxable income earned in Canada. Deemed Resident -You do not establish significant residential ties with Canada; and -You stay in Canada for 183 days or more in a calendar year; and -You are NOT considered a resident of your home country under the terms of a tax treaty between Canada and that country.  You are taxed on worldwide income for the time you are considered a resident * Deemed Non-Resident -You establish significant residential ties with Canada; and -You ARE considered a resident of another country with which Canada has a tax treaty  same rules apply to you as a non-resident of Canada

Resident and Non-Resident You are a resident of Canada for tax purposes if you establish significant residential ties with Canada. These individuals are taxed on worldwide income for the time they are considered residents.  Home in Canada  Spouse or common-law partner or dependents who move to Canada to live with you  Canadian driver's license, etc. You are a non-resident of Canada for tax purposes if you do NOT establish significant residential ties with Canada and you stay in Canada for less than 183 days during the year. These individuals are taxed only on taxable income earned in Canada.

Individual Example Mary- Recently arrived from Italy, started working in Canada upon arrival and also started school at UOIT.

Example Question 1.If Mary is a resident and she made $1000 in Italy and $1000 in Canada. What will she be taxed on? 2.What happens if she is a non-resident?

How to determine your Residency Status Form NR74- Used to determine residency status of those entering Canada. Form NR74- Form NR73- Used to determine residency of those leaving Canada Form NR73- If you don’t feel like mailing in the above form(s) and waiting for your response in the mail, you can contact the Canada Revenue Agency directly and they can go over the form(s) with you on the phone and tell you which of the 4 residency categories you fall under right then. Contact International tax and non-resident enquiries at

Tax Slips T4 slips ◦for income (Employer provides) T4A slips ◦ for bursaries and scholarships (UOIT or Scholarship/Bursary agency provide) T2202A slip ◦ Tuition, Education & Textbook Credit (Print off from MyCampus – Instructions on next slide) Transit Pass Credit ◦ UPASS credit (Print off from MyCampus – Instructions on next slide)

My campus Instructions: T2202A

Common Tax Return for Students: Employment Income Examples Include TA income McDonalds Walmart Any tips commissions

Bursaries & Scholarships Undergraduate Scholarships, grants and bursaries are not taxable but do need to reported in the tax return

Tax Credits/ Deductions –Common for Students What is a tax Credit ? an amount of money that can be subtracted from what you “owe” in taxes (your tax liability) What is a tax deduction? a reduction of your taxable income lowering the amount you would have to pay in tax Common Tax Credits and deductions for Students  Basic & Employment Tax Credit  Tuition, Education and Textbook Amount  Medical Expenses  Child Care Expenses  Transit Pass Credit

Basic & Employment Tax Credit For 2015, everyone is entitled to claim a basic personal amount of $11,327. The spouse or common-law partner credit You may claim the spouse or common-law partner amount if, at any time in the year, you were married or had a common-law partner and you were not living separately because of a breakdown of the relationship. Employment Amount Credit The Canada employment amount provides recognition for work-related expenses such as home computers, uniforms and supplies in the public and private sector. The lessor of: -employment income -$1,146

Tuition, Education and Textbook Amounts Allows you to reduce any income tax you may owe Educational institution will provide you with a slip that has the total eligible tuition fees paid as well as the months you were enrolled either part-time or full-time Found on my campus T2202A Education Amount Fulltime - $400 x # of months Pastime - $120 x # of months Textbook Amount Fulltime - $ 65 x # of months Part-time - $20 x # of months Students are entitled to carry forward unused tuition, education and textbook credits indefinitely. Unused credit amounts can be found on Client’s “ Notice of Reassessment” 8 months of school would equal: -Around $8,000 in eligible Tuition - 8 months x $400 =$ months x $65 = $520 -Total: 11,720 Important Notes Placement + Co-op Courses Remember Timing

Transit Pass Credit

Moving Expenses - Deduction You can claim eligible moving expenses if you move and establish a new home to work or run a business at a new location, or if you move to take courses as a student in full- time attendance enrolled in a post-secondary program at a university, college or other educational institution. To qualify, your new home must be at least 40 kilometers (by the shortest usual public route) closer to the new place of work or school. Move must be within Canada Moving Expenses are only deducted from Taxable Scholarships.

Child Care Expenses - Deduction How much can you deduct? -up to $8,000 annually for each child born in 2009 or later -up to $5,000 for each child born between 1999 and the total deduction cannot exceed two-thirds of the salary or business income of the parent who is required to claim the deduction. -it’s limited by the actual amounts paid in the year for childcare. What can you deduct? -Daycare or babysitting, boarding school and certain camp expenses -However, medical expenses, education costs, clothing and transportation expenses are not eligible

Student Loans Deductions A taxpayer may claim a tax credit on interest paid in the year on a student loan granted under a federal or provincial program Only the Interest portion of the loan Only for the first 5 years proceeding graduation Must be a federal or provincial student assistance program – OSAP Only applies to CND banks

2015 Income Tax Rates 15% on the first $44,701 of taxable income, + 22% on the next $44,700 of taxable income (on the portion of taxable income over $ 44,701 up to $89,401), + 26% on the next $49,185 of taxable income (on the portion of taxable income over $89,401 up to $138,586), + 29% of taxable income over $138,586

Example What is the Federal rate for someone with $65,000 of taxable income? $44,701 x 15% = $6,705 Plus $65,000 - $44,701= $20,299 x 22% = $4,465 Total Taxes Payable = $11,171

Calculation of Income Tax Gross Income from your paychecks and other income $ xx Multiply by the Tax Rate $ xx = Taxes Payable $ xx Less Applicable Tax Credits $ (xx) Less Amount deducted at the source ( Per Pay Cheq.) $ (xx) = Balance Owing or Refund $ xxx

Walkthrough of Taxable Income The Facts: -Income of $40,000 -$4,500 of eligible medical expenses -Full time school amounts totaling $11,720 -One Child – Expenses of $1,000 -Deductions from Paychecks total $5,000

CRA “My Account” All tax information in one place Able to review tax returns, HST credits, etc.

CRA Website Walkthrough

Notice of Assessment Summary of your Tax return after the CRA has reviewed it

What Happens Next? You should receive any T4 or T4A slips shortly Find out your residency Status You have a few options to do your tax return ◦Off the shelf software – UFILE or Turbo Tax ◦UOAA Tax Clinic ◦H & R Block Tax services (Oshawa Centre)

The UOAA Tax Clinic Solely Canadian Income Only Must be a resident for Tax purposes Mondays (March 7, 14 and 21) in ERC 1096 Wednesdays (March 9, 16 and 23) in UA 2130 Time: 6:00 – 9:00 pm