afm 202 tax tutorial slides week 3_2014_final.pptx

8/9/2019 AFM 202 Tax Tutorial Slides Week 3_2014_final.pptx

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AFM 202 Tax TutorialSept. 26, 2014


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In this tutorial

• Taxprep Midterm prep

• This week’s content▫ Other ncome!

Tax de"erred p#ans $%&&, %%S&, %'S&, etc.(

▫ )ed*ctions

%%S& contri+*tion Moin- expenses

hi#dcare expenses

▫ Tax &a/a+#e Tax redits

Medica# or disa+i#it/ credit


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Tax Prep Midterm Review


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Major Forms & Jump Codes to Know

asic orms

• denti"ication $)(

• ami#/ $3M(• acket $(

• Sched*#e 1 $1(

• O542 $O542(

T/pes o" ncome

• Se#"7emp#o/ment $2128(

• nterest, )iidends $T9,T8, 4(

• apita# :ains $3, 9(

• 'mp#o/ment $T4, 104(• Other income $T4%S&,T43, O%':5(


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Major Forms & Jump Codes to Know Cont’d

Other Misc. orms

•nsta#ments $5ST(• TS;M

• >>

• %%S&, %%S& M3?,

T2208• T1M

• 3%'


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Summar o! "omewor# $ro%lemsProblem Major things to know

1 &ropert/ income, +*siness income, +*siness expenses

2 3 $3, termina# #oss, recapt*re(, capita# -ains, #osses

9 Same as 1 2

4 %o##"orward

8 apita# -ains $&;&,


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Common Mista#es

• or-ettin- to check @Termina#


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ther thin's to note

• Oerrides! )o not do themB $;n#ess speci"ied(

• Deadin-s detai#s

• Enow what /o* can choose "rom F choose themethod that /ie#ds the #east amo*nt o" taxB

• )oes the person need a tax ret*rn $"or "ami#ies(

• or samp#e markin- ke/ #ike#/ to +e *sed F seeassi-nments markin- ke/ "rom #ast /ear


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QUESTIONS? GOOD LUCK!


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Tax (e!erred $lans ) Tax Impa*t

• &ension income▫ T4%S& 7 %e-istered %etirement Sain-s an,

$%%S&( income F taxa+#e when withdrawin-mone/ "rom /o*r %%S&

▫ T4%% 7%e-istered %etirement ncome *nd$%%( F what /o*r %%S& t*rns into a"ter >0

▫ T4O3S $O#d 3-e Sec*rit/( F c#aw+ack possi+#e

▫ T43& $&& income(

▫ T43 $orporate pensions, %'S& withdrawa#s(


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(edu*tions+ ,,S$

• np*t the iss*er and the date o" whenthe amo*nt was contri+*ted%%S& )ed*ction Gorksheet

• omp#ete "orm 102• 'ns*re %%S& Max Gorksheet is a#so

comp#ete

%%S& )ed*ction


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Spousal ,,S$

• Spo*ses can contri+*te to each other’s acco*nts

• Ghen withdrawa#s are receied, T4%S& is*sed i" there are spo*sa# contri+*tions ox24 needs to +e a @H'SA

• orm 2208 Spo*sa# %%S& in"ormation

• The amo*nt that /o* are c#aimin- on #ine 20cannot hae amo*nts "or a spo*se’s %%S& thatis -reater than /o*r own contri+*tion #imit


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Cal*ulatin' ,,S$ *ontri%ution limit• *rrent Hear %%S& contri+*tion #imit $in most

I*estions it is -ien( 7 There is a maxim*m amo*nt

we can contri+*te to o*r %%S&s.The ca#c*#ation sho*#d +e as "o##ows!

Add: Prior year RRSP deduction limit

Less: Prior year deduction

Plus: The lesser of: a) 18% * PY Earned income

) !"#$8"

Less: &nused RRSP contriutions carried for'ard

Less: Pension ad(ustment


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-imit .xamples

a( &a*#’s +ank te##s him that his ded*ction #imit "or2012 is J88,000. )*rin- 2012, he had

contri+*ted J98,800 to his %%S&. )*rin- 2012&a*#’s earned income was J200,000. Ghat ishis contri+*tion #imit "or 2019K

+( &a*#’s +ank te##s him that his ded*ction #imit "or2012 is J28,000. )*rin- 2012 he hadcontri+*ted J98,800 to his %%S&. )*rin- 2019&a*#’s earned income was J180,000. Ghat is his

contri+*tion #imit "or 2019K


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-imit solutions

a(


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-imit Solutions +( ,000

+( J29,20

Take this

Maxim*m contri+*tions made "or 2019 L J19,920

Ghat are the side7e""ects o" this conc#*sionK


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/er*ontri%ution

• n part , &a*# contri+*ted J98,800 when his#imit was J28,000 oer +/ J10,800. ew thin-s

to note that we a#so saw in I*estions!

1. The "irst J2,000 oer this #imit is OE and witho*t pena#t/ and can +e ded*cted in the

next /ear2. The remainin- J,800 is -oin- to hae a 1pena#t/ app#ied to it "or eer/ month itcontin*es to remain within the p#an


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(edu*tions ) Child*are .xpenses

hi#dcare)ata orm

• Make s*re to enter a## chi#dren on the 3M "orm "irst

• np*t a## chi#dcare inc*rred

orm >>

$3(

•


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Tax$rep spe*i!i* details 1Child*areexpenses

3##owa+#e ded*ction is the #east o"!

1. The amo*nt o" e#i-i+#e expenses paid as per&art 3 o" "orm >>

2. 2C9 N earned income

9. '#i-i+#e expenses +ased on date o" +irth

7 Other parts o" the "orm ask "or more in"ormationin re-ards to /o*r spo*se and their income #ee#


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Child*are expenses

hi#dcare expenses are on#/ app#ica+#e i"!

1. The/ are considered to +e e#i-i+#e expenses

the/ m*st +e "or thin-s s*ch as nannies, not +a+/sittin- $ex. parents -o to the moies at ni-ht(

2. The chi#d meets the @e#i-i+i#it/A criteria $m*st +e*nder 16 /rs. )*rin- an/ part o" the c*rrent /ear(

9. The expenses m*st +e "or the p*rposes o"ena+#in- the parents to -o o*t and work


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$ro%lem 3 !rom *lass•


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(edu*tions Mo/in' .xpensesMoin-expenseded*ctions

*st #ike chi#dcare expenses, there istax p#annin- ino#ed

Ge need to comp#ete additiona#"orms to s*+stantiate the

amo*nts T17M "orm

There are e#i-i+#e moin- expensesand not eer/thin- can +e deemed

an expense


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Mo/in' .xpenses

'#i-i+i#it/

• The re#ocation m*st +e an e#i-i+#e re#ocation• $)istance "rom O#d ho*se to work(7 $)istance "rom new ho*se to work(

P 40 km

T/pe o"income

• On#/ app#ica+#e with emp#o/ment or se#" emp#o/ed income• 5o ded*ction i" it is +ein- app#ied a-ainst inestment income or

emp#o/ment ins*rance +ene"its

'xamp#es o"e#i-i+#e

expenses

• Mea#s, accommodations, trae#, #ease cance##ation "ees, incidenta#costs, costs "or se##in- o#d residence and p*rchasin- new residence,

•


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Mo/in' .xpenses• There are two wa/s thro*-h which we can dea# with

moin- expenses!

1. )etai#ed method

2. Simp#i"ied method

•.The "irst method is more "oc*sed on trackin- a##aspects o" the expendit*re reI*ires a properco##ection o" receipts

•.The #atter method wi## p#ace #imits on certainthin-s s*ch as mea#s, since there is #itt#e eidence

to s*+stantiate the amo*nts


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Mo/in' expense .xamplesa#c*#ate the moin- expense ded*ction "or the "o##owin-sit*ation!

ernice and Een moe their "ami#/ on an*ar/ 1, 2012 to Gater#oo, Ontario "rom Eitchener Ontario. The distance"rom their o#d ho*se to their new work is 80km. Thedistance "rom their new ho*se to their new work is 90km.

The/ inc*rred the "o##owin- costs!Moin- tr*ck ! J100

:as "or car! J80


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Mo/in' .xpense Answer• This was a trick I*estionB One o" the reI*irements

"or moin- expenses to +e ded*cti+#e is that the

re#ocation m*st +e e#i-i+#e. The di""erence +etweenthe workp#ace "rom the new ho*se #ess the distance"rom the o#d ho*se to the workp#ace is on#/ 20km.

• 3s noted ear#ier, the reI*irement is 40kmQ hence,

none o" these costs are ded*cti+#e.

ote: the interior costs on the house are not oin

to e deductile$ e+en if the ,rolem could 'or-.


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Mo/in' expense example• 3s a "ami#/ moes, one o" the costs that is

inc*rred is re#ated to mea#s that the/ had to eat

d*rin- the moe. The moe was "rom San 3ntonio, Texas to a#-ar/, 3#+erta. n tota#, the"ami#/ o" "ie had cons*med J6,000 o" "ood in aspan o" 10 da/s. The/ hae kept a## o" theirreceipts, what is the amo*nt that can +ec#aimedK

• Ghat i" there were no receiptsK


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Mo/in' .xpense example answer• 3( J6000 can +e c#aimed, since there is proo" o"

the receipts $this is the detai#ed method(

• ( i" there are no receipts, then that means, wem*st *se the simp#i"ied method. 3s per the %3$http!CCwww.cra7arc.-c.caCtrae#costsC(, we

m*st c#aim J1> per da/ "or each mea# per person,so it wo*#d +e! J1>N9N8N10L J2,880.

http://www.cra-arc.gc.ca/travelcosts/http://www.cra-arc.gc.ca/travelcosts/http://www.cra-arc.gc.ca/travelcosts/http://www.cra-arc.gc.ca/travelcosts/


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4ho *laims Mo/in' expenses• ;s*a##/ p#aced on the indiid*a# with the hi-her

income

• This is +eca*se the/ hae a hi-her mar-ina# taxrate and hence there is a -reater impact

• The moin- ded*ction wi## #ead to a red*ction o"

the income that is taxed

hence, those with thehi-her income and in a hi-her tax +racket wi## +ene"it "rom the red*ction potentia##/ moin-them o*t o" a hi-her +racket and into a #ower one


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Tax $aa%le & Tax Credits• Taxes pa/a+#e F +ased on income +rackets

• Mar-ina# tax rate 7 M3%:53<

• Ghat is the di""erence +etween a credit andded*ctionK▫ )ed*ction is a-ainst taxa+#e income whereas

credits are a-ainst taxes pa/a+#e


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5on ,e!unda%le Tax Credits

• Ghat does non7re"*nda+#e meanK

• Some o" the credits R 18, on Sched*#e 1▫ asic persona# credit

▫ Spo*sa# credit

▫ hi#d Tax credit

▫ 3-e credit

▫ anada 'mp#o/ment

▫ )onations $)O53TO5(

▫ Medica# 'xpenses $M')(

▫ T*ition $T22023(

▫ Text+ook $T22023(▫ &&C'

▫ nterest on St*dent 0(

▫ &o#itica# donation$&O


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Medi*al /s6 (isa%ilit Credit• )isa+i#it/ credit F check +ox on ) "orm

• Dow to decide which oneK

▫ The disa+i#it/ amo*nt is J>,846. The tax credit is 18 o" this.▫ The medica# amo*nt is the amo*nt o" the tota# medica#

expenses #ess a thresho#d amo*nt. The tax credit is 18 o"this.

▫ The tax sain- "rom $( is at most! 18 x J10,000 J>,846

▫ The tax sain- "rom $3( is! 18 x "*## cost o" an attendant ▫ Th*s, $3( wi## a#wa/s +e +etter i" the cost o" an attendant is

more than J1>,846.

▫ or attendants cheaper than that $e.-., a J8,000 part7timeattendant(, $( mi-ht +e a +etter choice.

afm 202 tax tutorial slides week 3_2014_final.pptx

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