Chapter 3 In-Class Notes. Background on Taxes Taxes are a source of revenue for our federal, provincial, and municipal governments. We pay taxes on personal.

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Presentation transcript:

Chapter 3 In-Class Notes

Background on Taxes Taxes are a source of revenue for our federal, provincial, and municipal governments. We pay taxes on personal income, consumer purchases, property, wealth transfers, and capital assets. 3-2 Copyright © 2009 Pearson Education Canada

Do You Have to File a Return? You must file a tax return if you have earned income for one calendar year. Step 1: Calculate Total Income Wages and salaries Interest income Dividend income Capital income Step 2: Subtract Deductions RPPs and RRSPs Union/professional dues Child care expenses, support payments, carrying charges, moving expenses, and employment expenses 3-3 Copyright © 2009 Pearson Education Canada

Do You Have to File a Return? (Continued) Step 3: Calculate Taxable Income Taxable income = net income Step 4: Calculate Net Federal Tax Payable Determine your tax liability Determine your tax credits Determine your transferable tax credits Determine the tax credits you can carry forward 3-4 Copyright © 2009 Pearson Education Canada

Do You Have to File a Return? (Continued) Step 5: Calculate Net Provincial Tax Payable You pay tax on your income to the province or territory in which you live Step 6: Calculate Total Tax Payable The taxes you pay to the federal government plus those you pay to your provincial or territorial government equal your total tax payable 3-5 Copyright © 2009 Pearson Education Canada

Do You Have to File a Return? (Continued) Step 7: Determine Total Tax Already Paid Record the total income tax deducted (Box 22 of your T4) Step 8: Refund or Balance Owing You will receive a refund if your total tax payable (line 435) is less than your total tax credits (line 482) You will have a balance owing if your total tax payable (line 435) is more than your total tax credits (line 482) 3-6 Copyright © 2009 Pearson Education Canada

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