Basics of Cantax and Entering Data from Information Slips

Transcription

1 Basics of Cantax and Entering Data from Information Slips Revised April 22, 2018

2 The Tax Shelter Training 2

3 The Tax Shelter Training 3 To the Student Most of the material in this manual is based on the 2017 T1 tax return and the 2017 Cantax program. However, some of the examples shown may be from a previous year and have not been updated because the form has not substantially changed from the year the example was written. The manual is continually being updated to reflect any significant changes to the Cantax program and the T1 return. The Cantax program has changed only slightly over the years. Thus when you complete the course using the 2017 program, you will be quite able to complete T1 for later years using the Cantax program for that year. The main purpose of the manual is to show the preparer how and where to interpret and enter data into the Cantax program. It does not replace the CRA tax guide, pamphlets, or any on-line sources of tax information. The Canada Revenue Agency (CRA) web site gives a wealth of information about the T1 return (you might say they wrote the book on taxes). Research and read information from that site as you proceed through the training. You should obtain a copy of the T1 General Tax Guide from the local Post Office or download it from the CRA site. Good luck with the course. You will find that it is quite demanding and will require a lot of study and research on your part. The type of business you will be entering demands that each return is correct. One little error can, in some cases, lead to big problems for the client and embarrassment for us. So each quiz will be strictly graded. Take your time and do it right the first time. The CRA web page "Doing Your Taxes" is a great place to begin.

4 The Tax Shelter Training 4 Canadian T1 Tax Return in a Nutshell When filing a Canadian T1 tax return, an individual taxpayer must report his or her world income for the year to arrive at Total Income (Line 150). He or she may then reduce that income by certain deductions to arrive at Net Income (Line 236). These deductions include such as items as Registered Retirement Savings Contributions, union and professional dues, child care expenses, and business investment losses. Net Income is used for determining several incometested social benefits provided by the federal and provincial/territorial governments. Further deductions are allowed in determining Taxable Income (Line 260). These deductions include a deduction for residents of northern Canada, Capital and Non-Capital Losses of other years, and a Canadian Forces and Police Deduction. Federal Tax on Taxable Income is calculated on Schedule 1 (page 2) based on a percentage of the taxpayer's Taxable Income. The percentage used to calculate the tax increases as the Taxable Income increases. Rates for 2017 Non-refundable tax credits are calculated on Schedule 1 (page 1) and then deducted from taxes payable to arrive at the Basic Federal Tax. These credits are calculated as a percentage of such items such as a basic personal amount, age amount, claim for spouse, dependents, Canada/Quebec Pension Plan contributions, Employment Insurance premiums, disabilities, tuition and education, medical expenses and charitable donations. Other tax credits can also be deducted from taxes payable to account for tax already paid on certain income. These include the Dividend Tax Credit and the Foreign Tax Credit. In addition, the taxpayer can deduct a percentage of any political contributions. When these deduction are subtracted from the Basic Federal Tax, the balance is the Net Federal Tax. The Refund or Balance Due is then calculated as the difference between the Net Federal Tax and the total of the Tax deducted from employment income and installments plus any refundable credits such as the Working Income Tax Credit and Refundable Medical Credit. The Provincial Tax is basically calculated in the same way as the Federal Tax. Deadline for filing - April 30th.

5 The Tax Shelter Training 5 Objectives: Tax Shelter Training Program Upon completion of The Tax Shelter Training Program, the student will be knowledgeable in, and able to apply the following to the Tax Preparation Business: 1) The Canadian tax laws for individuals 2) Types of income that are taxable in Canada 3) The eligibility requirements for most of the allowable Deductions and Credits 4) The Use of the CanTax program to prepare returns involving many different sources of income and deductions 5) The eligibility criteria for discounting a refund 6) Electronically filing returns 7) The Tax Shelter operating policies and procedures Parts of the Course The Course in divided into 9 parts. Part 9 is completed only by those who become an agent or employee of the Tax Shelter. Part 1 Cantax Basics and Income Slips Part 2 Non-Refundable Tax Credits Part 3 Deductions to Arrive at Net Income Part 4 Taxable Income, Medical and Charitable Part 5 Employment and Other Expenses Part 6 Rental Income and Expenses Part 7 Business Income and Expenses Part 8 Capital Gains and Losses Part 9 Tax Shelter Discounting and Tax Prep Policies and Procedures

6 The Tax Shelter Training 6 Basics of Cantax and Entering Data from Information Slips SETTING OPTIONS IN CANTAX... 7 Start a New Return... 9 Save the Return Open a Saved Return Selecting Fields to Display in Index NAVIGATING AROUND THE RETURN The GOTO Key <F4> or the GOTO Icon Tabs Default Tabs <F6> - Expand <F1> - On The Line Help <F2> - Override CHECKING YOUR WORK Viewing a Summary <F8> Viewing the Diagnostics <F9> PRINTING A RETURN PDF FILE: PAPER FILING A RETURN ESSENTIAL SHORTCUT KEYS ENTERING INFORMATION ON A RETURN Information Screen Summary of Information on the INFO Screen T1 - Page The Dependant Information Screen (T1-DEP) How to Attach a Dependant's Return ENTERING DATA FROM INFORMATION SLIPS T4 Slips - Employment Income T5 Slips - Investment Income T3 Slips - Trust Income T4A - Statement of Pension, Retirement, Annuity, and Other Income , 105.2, and Scholarships (study grants), fellowships, bursaries T5007 Slips - Workers Compensation or Social Assistance T4A(OAS) Slip Old Age Pension and Foreign Pensions Foreign Pension T4A(P) Slips Canada Pension T4RSP Slips Registered Retirement Savings Plan Income T4RIF Slips Registered Retirement Income Fund Income T4PS Slips RC62 Slips - Universal Child Care Benefit Statement- Line RC210 Slips - Working Income Tax Benefit Advance Payments Statement T5018 Slips - Statement Of Contract Payments T5013 Slips Statement of Partnership Income Quebec Earnings RL Foreign Income and Foreign Tax Credit INCOME NOT REPORTED ON SLIPS GST/HST Rebate Received in Previous Year Income that Must be Self-Reported Non-Taxable Income (which does have to be reported) Non-Taxable Income (which does NOT have to be reported) Non-Taxable Employment Benefits... 66

7 The Tax Shelter Training 7 Setting Options in CanTax Before learning about taxes, download, install and setup the Cantax program for use with the exercises and quizzes. The program is found on the Tax Shelter website thetaxshelter.ca. After it is installed, you will need to set certain preferences to be able to use it to do the assignments. On the Toolbar click on Options, Preferences and select General. Since the Social Insurance Numbers and Cities in the examples and exercises are fictitious, be sure to uncheck the Validate SIN and Validate City check boxes. In addition, make sure there is a check mark in all the Diagnostic Types section.

8 The Tax Shelter Training 8 Next select Display and put a check mark in the Use Multi-line form tabs and Default Index Open check boxes as shown below. To run the full version of the 2017 Cantax program, use the following activation key: B88F GECA 2A88 2F94 Cantax is set up to look like a paper return. If you have completed T1 returns on paper, the screen should look familiar. The preparer can easily access the T1 Jacket and all the schedules.

9 The Tax Shelter Training 9 Start a New Return To start a new return for a first time client, point and click on File and then New The screen will look like this if this is the first return after installing the program. The frame on the left hand side (Index of Information) is not used in this course so we shall hide it. To hide the Index of Information frame, click on View and then click on Index of Information Now the screen will look like this

10 The Tax Shelter Training 10 Save the Return After all the personal information has been entered, the return(s) should be saved. To save the return(s) on the hard drive of your computer click on File and then Save. A screen similar to the one below will appear. Click on Save. Save Open a Saved Return The return will be saved in the Returns directory on the hard drive of your computer If you have already entered information on a client for this year and saved it, you can recall that return at any time. Point and click on File and then Open. Select the client from the list.

11 The Tax Shelter Training 11 (Open a Saved Return continued) OR: Point and click on Index and then Open. Select the client from the list. If there are no names in the Index, select Rebuild Index to create an index of returns stored in Index Display Fields The best way to Open a return from the current year or to Carry-Forward a return from the previous year is by using the Index.

12 The Tax Shelter Training 12 Selecting Fields to Display in Index To open the Index select Index/Open To select which fields you wish to have displayed in the Index, right click on the mouse and click on "Change Display Fields"". The window below appears. Select the fields you wish to appear in the Index and click "OK".

13 The Tax Shelter Training 13 Navigating Around the Return The GOTO Key <F4> or the GOTO Icon This key is used to "Open a Window" to any information slip, schedule, form or any part of the return. When the <F4> key is pressed or the GOTO Icon is clicked, a window with a list of forms, schedules etc. is displayed. To access any form, schedule or information slip simply move the highlight bar (using the arrow up or down keys) to the desired selection or type the appropriate letters and/or numbers of the form, and then press <Enter>. For example, to go to the screen to enter information from a T4 Slip, press <F4>, type T4 and then press <Enter>. To close the GOTO Window, press the <ESC> key or click on the X in the GOTO Form screen. Click here to close the GOTO Form window Goto Icon Tabs After you select a form, schedule or information slip, a tab will appear at the top of the screen so that you can easily return to that form, schedule or slip by simply clicking on the tab. Tabs

14 The Tax Shelter Training 14 Default Tabs The preparer may select which forms are open by default when a new return is started or carried forward from the previous year. If no defaults are selected, only the INFO screen is open. To set the program to open the most common forms when a new return is started, use the following procedure: Open a blank, new return and, using <F4>, open the forms that you use most often. The list below are the most common. Page 1, 2, 3 and 4 of the T1 T183 S1 RC71 T4E T5 T1013 T1C\428 T4 RC62 To set these as default tabs, select Options/ Save Default Tabs. You can now move between forms by simply hitting the tab.

15 The Tax Shelter Training 15 <F6> - Expand Often a field will have a magnifying glass in it. This means that you cannot enter information directly in that field. You must expand to another screen to enter information. To expand to that screen, press <F6> while in the field or double click on the field. Press <ESC> to return to the original screen. For example, you cannot enter data directly into Line 219 (Moving Expenses) page 3. If you expand at that line you will be taken to the Moving Expenses (T1-M) Schedule. When this schedule is completed, the claim will be posted to Line 219 on page 3 of the T1. <F1> - On The Line Help If you need help, simply press <F1> while you are on the line for which you need information. For example, pressing <F1> while on Line 212 (Union Dues) will display a help screen as below. <F2> - Override Fields in which the preparer can enter information directly contain "0.00" in black. Calculated fields into which the preparer cannot enter data directly are in blue. There are time, however, when it necessary to override a calculated field. To do that press <F2> while in the field and enter data. Notice that a pencil appears in any field that has been overridden. To remove the override, press <F2> again while in the same field. Calculated Field Calculated field that has been Overridden

16 The Tax Shelter Training 16 Checking Your Work At any time while the return is being prepared, you can view a Summary of the information on the return and view the Diagnostics to find any errors that may prevent the return from being efiled. Viewing a Summary <F8> Press <F8>. This will display a summary of the return(s). Viewing the Diagnostics <F9> Press <F9> to display diagnostics (Possible Errors). This screen is essential to determine if the return is eligible to be efiled. A list of errors that must be corrected before the return is ready to efile will be highlighted in green. By clicking on the green highlight error, the program will go to the screen and line where the error is located. After the error is corrected, press <F9> again to see if there are any other errors.

17 The Tax Shelter Training 17 Printing a Return Point and click on Print on the toolbar, move the highlight bar to "Return" and press <Enter>. An X will be displayed in column A for each form that has been used to prepare the return. To remove a form from the list, click in the box to remove the X. To print only the forms that are used by CRA click on Select and then Select CRA forms. Click here first Then Select CRA Forms It is usually not necessary to print the complete return for the client when the return is efiled. The client may, however, want a summary and important schedules like rental, moving and business. Printing the Four Page Jacket: This can be done by selecting only the first four pages to be printed as follows. Select Print from the menu toolbar, Select Single Form and T1-Jacket. Press the Print button in the dialog box. Basic Forms: Most clients do not require a complete printout of the T1 return. It is usually acceptable to provide only the Summary A and the T183. In addition, discount clients must be provided with a RC71. To access the one page Summary A, press GoTo /Form and type "summ". Summary will be highlighted. Move down one item in the list to Summary A. Printing a Single Form: Pull down the Print menu, move the highlight bar to "Single Form" and press <Enter>. Type the number of the form and press <Enter>. If you wish to print the form that is currently being used, pull down the print menu and select Current Form, or press <Alt>+<F11>.

18 The Tax Shelter Training 18 PDF File: Cantax has a pdf printing feature that is easy to use. In the example below, the file for John Taxpayer is being created as a pdf file. From the Cantax Menu select Print/Return or press <F11> just as you would to print a paper return. Click on Print. The window on the right is displayed. All forms that have been used in the preparation of the return are selected and have an "X" in the column A. This includes worksheets, client letters, CPP overpayment calculation etc. These do not need to be printed. To print only forms required by CRA, click on Select at the bottom of the window; a popdown menu appears. Click on Select CRA Forms. Now only CRA forms will be selected (see the red maple leaf after the form number). Now only forms that would be filed with CRA have an X in the column. To create the pdf version of the T1with the selected forms, select PDF.

19 The Tax Shelter Training 19 As with printing a paper version, the return must be saved first. Select Save. The window to the right appears. Here you must select where to save the pdf file. If it is saved to the Desktop it easy to find later. The pdf file will contain the name of the client without any reference to the year. You may want to change the name to include the year. For example: Taxpayer,John2017.pdf

20 The Tax Shelter Training 20 Paper Filing A Return There are times when we are unable to Efile a return and thus a paper one must be filed. A paper return must include the following: Page 1, 2 and 3 Condensed Jacket T1-KFS Condensed Information slips Before printing the return, go to the INFO screen and answer NO to the question Consider this return for Efile? ). On the Print screen click on Select and then Select CRA Forms to show only forms that are used by CRA. Also select Paper as the copy option. Click OK to print. Select CRA Forms Select Paper The return should be put together in the following order: Pages 1 and 2 of the Jacket Condensed Information slips and receipts Pages 3 and 4 of the Jacket Condensed Staple in the top left hand corner. Note: The T1-KFS contains a bar code that contains all the information on the return.

21 The Tax Shelter Training 21 Essential Shortcut Keys Most of the movement and selections can be made using point and click with the mouse. However, you may find it useful to memorize and use some shortcut keys to help speed things up while preparing a return. <F1> <F2> <Alt> + <F2> <Shift> + <F2> <Ctrl> + <S> <Ctrl> + <F11> <F4> <Ctrl> + <F4> <Ctrl> + <F2> <F5> <F6> <ESC> <F8> <Ctrl> +<F7> <Ctrl> + <F8> <F9> <AlT> + <F8> Tax Information Help (On that line) Override Display Calculator/Adding Machine Recalculate the return Save a Return Print Current Form Goto a Selected Form, Slip or Schedule Close a Form or Page Goto a specific line on the T1 Switch to Spouse's Return Expand Close Display Tax Return Summary Display Comparative Summary Display Notes Display Diagnostics Display Information about Return

22 The Tax Shelter Training 22 Information Screen Entering information on a Return The first step in preparing a return is to complete the "T1-Information" (INFO) Screen. The INFO screen is where you enter personal information about the taxpayer and spouse or commonlaw partner including: name, SIN, address, province of residence on Dec 31, date of birth, marital status, changes during the year, spousal information, etc. To go to the INFO screen, Press <F4>, select INFO and press <Enter>. Use <Page Up> and <Page Down> or the Scroll Bar to move around the page. Most returns prepared by computer today are efiled to CRA, thus it is very important to note that CRA has certain requirements about how the data must be entered on the return. Following is information about entering data within the "T1 Information" screen for returns that will be EFILED. If the return is to be EFILED, select "Yes" on the line "Consider this return for EFILE?. Each point and click of the mouse changes the selection from yes to no or vice versa. If the return is to be discounted select "Yes" on the line "Will this return be discounted? DO NOT use periods after the taxpayer's initials. If a taxpayer has multiple first names, use a hyphen (dash) between the names, eg. Mary- Lou, Jean-Paul. DO NOT use an apostrophe, dash or comma in the street address. Cantax Edit Tip - How to erase all manually entered data from a screen. Sometimes information is entered on a screen in error and the preparer wishes to erase all the manually entered information from that screen. While that screen is open click on Edit on the toolbar and then click on Clear All.

23 The Tax Shelter Training 23 Let's look at the INFO screen section by section. The section below is used to enter basic information about the client including name, address, telephone number and date of birth. Indicate here if T1 returns for other years are also being filed for this client at this time. If an adjustment is being made for this return, click here to go to the T1-Adjustment Screen Indicate here if the client is eligible for the Disability Amount Indicate here if the client's name has changed from the last return or if this is a first time filer.

24 The Tax Shelter Training 24 This section is used to indicate if the taxpayer has sold a personal residence during the year. It is also used to enter residency information and marital status on December 31 of the tax year. The province of residence for self employed taxpayers must be indicated. INFO Screen Indicate here if the taxpayer sold his/her principal residence during the year. Province of Self-Employment must be entered if the taxpayer is self employed. This section is used to enter information on the client's Spouse or Common Law partner. Name, date of birth, address etc. Leave blank if Widowed, Divorced, Separated or Single on Dec 31 unless claiming a spouse in year of marital change. INFO Screen Select "yes" to have the spousal returns processed together.. highly recommended.

25 The Tax Shelter Training 25 Most of the section shown below is completed automatically by Cantax if the spousal return is attached to the client's return. It is highly recommended that both return be prepared together to be sure all claims are made correctly. This will be discussed in more detail a little later. If the spouse has no income, a check mark must be placed in Box The information on the UCCB (Universal Child Tax Benefit) or the RDSP (Registered Disability Savings Plan) received or repaid by the spouse must be entered manually. INFO Screen Indicate in the section below if the taxpayer died during the year, went bankrupt or immigrated to Canada or emigrated from Canada. INFO Screen Note that if the taxpayer died during the year and the date of death is entered, the return will be filed as a Final Return 70(1).

26 The Tax Shelter Training 26 The section below is used to enter information on the client's citizenship and authorization to CRA to provide that information to elections Canada. It is also used to indicate if the client owns foreign property costing more than $1000, INFO Screen Use the section below to indicate if the taxpayer is registered with CRA for My Account. Information from the CRA Website My Account A taxpayer can check his/her refund, account balance, instalment payments, RRSP deduction limit, Canada Child Tax Benefit, Universal Child Care Benefit, GST/HST credit, and much more on My Account? He/she can also change returns, change address, arrange direct deposit, authorize a representative, set-up a payment plan, or register a formal dispute. To use My Account, the taxpayer has to register for a Government of Canada epass, which includes the mailing of a Canada Revenue Agency security code. This section can also be used to authorize the CRA to send an to inform the client that he/she has mail to view in My Account. All future correspondence will sent to My Account; the taxpayer will no longer receive paper correspondence. INFO Screen

27 The Tax Shelter Training 27 For taxpayers not registered for on line mail, this section gives the option to receive a paper Notice of Assessment as usual or request that the preparer download a copy of the NOA and provide it to the client. This section also allows the client to elect to have his/her Notice of Assessment and/or Refund sent to an alternated address such as the Tax Shelter. In this case the return must be paper filed and a completed and signed T1132 form must be attached to the return. Also indicate here if the client has a Tax Free Savings Account (TFSA). The section below is used to provide information on the client's legal representative. This section will be used if the taxpayer has given Power of Attorney to another person or the taxpayer is deceased and the Executor is filing the return.

28 The Tax Shelter Training 28 Coupling Spousal Returns Cantax is able to couple (link) both spouses returns together. This will allow the automatic transfer of any claims that may be made from one spouse to the other. When information about the taxpayer s spouse is entered on the INFO screen of the taxpayer, that information will be transferred automatically to the spouse s return if the returns are coupled. It is highly recommended that spousal returns be coupled. To couple both spouses returns, click in the field after the question "Process spousal returns together?" on the INFO screen (the default is NO). If the returns are already coupled, "Yes" will be shown in the box. If "No" is in the box, click on the field and a box will appear with three possible selections. Select Current year return if the spouses return for the current year is already on file because his or her return for the current year was prepared earlier in the year. Make sure the returns are not already coupled. If they are coupled, you may press <F5> to toggle back and forth between the two returns. The spousal return will be green in colour. Select Previous year return if you wish to carry forward a spouse s return from the previous year that has not already been carried forward. This would happen if the returns were prepared separately in the previous year and not coupled Select New return if the return for the spouse is not on file for the previous or current year. This is usually the case with new clients. <F5> Key: After the returns are coupled (linked), you may toggle back and forth between the two, coupled returns, by pressing the <F5> key. One return has a blue screen and the other will be green. Please note that if the returns were completed as a couple in the previous year and you are carrying them forward from the previous year, the returns for the current year will automatically be coupled. DO NOT enter the Net Income of the spouse on the taxpayer's INFO screen if both returns are being processed together (coupled). The program will automatically calculate the Net Income of each spouse and transfer it to the other return.

29 The Tax Shelter Training 29 Summary of Information on the INFO Screen Efile yes/no Discount yes/no Filing return for other years yes/no Refile a return (T1-Adj form) SIN, Name, Date of Birth and Address for taxpayer Sale of Principal Residence yes/no Province of Residence Province of Self-Employment Marital Status Care of - Name Only SIN, Name, Date of Birth and Address for taxpayer's spouse Date of death for Deceased Taxpayers Date of Bankruptcy Date of Immigration/Emigration Authorization for CRA provide information to Elections Canada Foreign Property over $100,000 yes/no (Form T1135) Taxpayer registered for My Account yes/no Register of CRA on-line mail yes/no/already registered Taxpayer address Notice of Assessment delivery options Paper/Electronic Alternative Address yes/no (Form T1132) Tax Free Savings Account yes/no Taxpayer's Legal Representative (Name and Position) Address of Executor or Administrator of the estate for a deceased taxpayer Taxpayer confined to a prison or similar institution yes/no

30 The Tax Shelter Training 30 T1 - Page 1 The information entered on the INFO screen is automatically posted to the page 1 of the T1. The preparer must, however, enter the Residency and Elections Canada information on the bottom of the screen.

31 The Tax Shelter Training 31 The Dependant Information Screen (T1-DEP) To make a claim for any dependant other than a spouse or common-law partner, the information about the dependant must be entered on the Dependant Information Screen (DEP). To go to that screen press <F4>, type DEP and press <Enter>. If the dependant has income and is filing a tax return, his/her return should be attached to the taxpayer's return. (See next page). In that case do not enter income information on the DEP screen but rather on the attached dependant's return. All necessary information will then be posted to the T1-Dep screen on the taxpayer's return.

32 The Tax Shelter Training 32 How to Attach a Dependant's Return To attach a dependant's return to the taxpayer, simply go to the Dependant (DEP) screen and click on the NO after the question "Process dependant's return together". A box will appear with three possible selections Select Current year return if the dependant's return for the current year is already on file because his or her return for the current year was prepared earlier in the year. Select Previous year return if you wish to carry forward a dependant's return from the previous year that has not already been carried forward. This would happen if the returns were prepared separately in the previous year and not coupled Select New return if the return for the dependant is not on file for the previous or current year. This is usually the case with new clients. Select the appropriate option and click OK. A new return will be created. The return for any dependant will be yellow. To access the dependant's return at any time click on the pull down arrow on the top right hand corner. The names of all attached returns will be displayed. Click on the name to select the return. Note that if the dependant's return was attached to the taxpayer's return in the previous year, it would be carried forward to the current year with the taxpayer's return and remain attached.

33 The Tax Shelter Training 33 Entering Data from Information Slips After the INFO screen is completed, the preparer should enter information from the information slips. When income is entered from the slips, Cantax automatically calculates the federal and provincial taxes and posts the amounts to page 4 of the T1. To access the screen for a list of forms and slips, press <F4>. The "Goto Form" screen shown below will be displayed when <F4> is pressed. To select a specific form a specific form or slip, type the first few letters or numbers of the slip or form. For example to display the T4 slip screen, type T4. The list below will be displayed. Make sure the T4 line is highlighted and press <Enter> to go to the T4 screen.

34 The Tax Shelter Training 34 Most Common Form, Slips and Schedules What to Type Personal Information INFO T1-Jacket T1 Page of the return T1-page number Information Slip T (slip number) (ie. T4, T5, T4E, T3 etc) Schedule 1 Federal Tax S1 Schedule 2 - Transfer From Spouse S2 Schedule 3 - Capitals Gains Summary S3 Schedule 4 - Investment Income S4 Schedule 5 Eligible Dependant S5 Schedule 6 - Working Income Tax Benefit S6 Schedule 9 Donations and Gifts S9 Schedule 11 Tuition and Education S11 Discounting Transaction RC71 Adjustment Form ADJ Automobile Expenses AUTO Business Income & Expenses T2125 Canada Pension Income (CPP) T4AP Charitable Donations DON Child Care Expenses T778 Claim of dependants DEP Direct Deposit Request DD Efile Authorization T183 Authorizing or Cancelling a Representative T1013 Employment Expenses T777 Employee and Partner GST Rebate GST-370 Fishing Income & Expenses T2121 Foreign Pension Income T4A(OAS) Foreign Tax Credit FTC Medical Med Moving Expenses T1M NL 428 Newfoundland Tax 428 Northern Residents Deduction T2222 Old Age Security T4A(OAS) Pension Splitting T1032 Rental Income T776 Receipt Rec RRSP Contributions RRSP

35 The Tax Shelter Training 35 T4 Slips - Employment Income For more information on completing a T4 slip see Completing the T4 Slips Generally, most of the income that a taxpayer receives will be shown on a T4 slip. ABC Company 52, , , X 46, John Doe 1, , , Most Common Information found on the T4 Slip Box (14) Gross employment income before deductions Box (16) and (17) Canada or Quebec Pension Premiums Box (18) EI Premiums Box (20) Registered Pension Plan Premiums Box (24) EI Insurable Earnings Box (26) CPP/QPP Pensionable Earnings Box (22) Income Tax Deducted Box (32) Travel in a Prescribed Zone Box (42) Employment Commissions Box (44) Union Dues Box (46) Charitable Donations Box (66) Eligible Retiring Allowance Box (85) - Employee Paid Premiums for Private Health An X in Box (28) indicates the employee is exempt from, paying EI, CPP or both. In this case the employee is exempt from paying EI and thus 0.00 must be entered in Box 24.

36 The Tax Shelter Training 36 Box 29 - Employment code. If a taxpayer receives a T4 with no income reported in Box (14) but a code in Box (29), he/she may be considered to be self-employed and be able to claim business expenses. This will be discussed later. The codes are: 11 - Placement agency 12 - Driver of taxi or other passenger-carrying vehicle 13 - Barber or hairdresser 14 - Withdrawal from a prescribed salary deferral arrangement plan 15 - Seasonal Agricultural Workers Program 16 - Detached employee - Social security agreement 17 - Fishers - Self-employed Other Information" Area The "Other information" area at the bottom of the T4 slip has blank boxes for the employer to enter codes and amounts that relate to employment commissions, taxable allowances and benefits, deductible amounts, fishers' income, and other entries, if they apply. The boxes are not pre-numbered as in the top part of the slip. Codes 30 - Housing, board, and lodging* 31 - Special work site 32 - Travel in a prescribed zone* * These amounts will be 33 - Medical travel shown in shaded areas and are 34 - Personal use of employer's automobile* already included in Box Interest-free and low-interest loan* and do not have to be reported 37 - Employee home-relocation loan deduction as income elsewhere Security options benefits* 39 - Security options deduction 110(1)(d) 40 - Other taxable allowances and benefits* 41 - Security options deduction 110(1)(d.1) 42 - Employment commissions 43 - Canadian Forces personnel and police deduction 53 - Deferred security options benefits 66 - Eligible Retiring Allowance 70 - Municipal officer's expense allowance 71 - Status Indian employee 72 - Section income - employment outside Canada 73 - Number of days outside of Canada 74 - Pre-1990 past service contributions while a contributor 75 - Pre-1990 past service contributions while not a contributor 77 - Workers' compensation benefits repaid to the employer 78 - Fishers - Gross earnings 79 - Fishers - Net partnership amount 80 - Fishers - Share-person amount 84 - Public Transit pass Many of these will be discussed in detail later.

37 The Tax Shelter Training 37 Reporting Information from a T4 Slip Generally, T4 income is reported directly on the T4 screen in CanTax. To report the income from a T4 slip, GoTo the T4 slip screen by pressing <F4>, type T4 and press <Enter>. When the data from the T4 is entered on this screen, most of it will automatically be transferred to the appropriate lines on the T1 Return. We will discuss other situations later in the course. When the amount from Box 14 on the T4 is entered on the screen, that same amount will automatically be displayed in Boxes 24 and 26 (EI Insurable and CPP Pensionable Earnings) to the maximum for the year. If the amount shown in Box 24 or 26 on the T4 slip is different from what is in Box 14 and is not the maximum amounts for the year, override those amounts to enter the correct amounts as shown on the T4. To override, click in the field and press <F2>. Now enter the correct amount. If Boxes 24 and/or 26 on the T4 are empty or have a "0", it is understood that the amount that should have been entered in those boxes is the same as in Box 14 unless there is an "X" in Box (28.1) and/or Box (28.2). DO NOT enter 0 in boxes 24 or 26 unless there is an "X" in the corresponding Box (28.1) or (28.2). An "X" indicates that the taxpayer is exempt from paying CPP or EI premiums. Notice that the screen shows only 3 columns. If the client has more than three T4 slips, hold the <Ctrl> and press <Right Arrow> to move to column 4 and 5 etc. use the <Left Arrow> to move to the left. Notice that the last column will always show the Totals. This can be used for all screens requiring more columns. Note that you cannot move to column 4 until information is entered in column 3.

38 The Tax Shelter Training 38 Exempt Employment Income For Status Indians Income earned by a status Indian on a reserve is exempt from income taxes and does not have to be reported as employment earnings. Employers have to report on a T4 slip employment income that is exempt under section 87 of the Indian Act. On the slip, an employer will enter code "71" in the area called "Other information.". Pensionable earnings must be reported in Box 26 of the T4 slip if an employer has elected to cover exempt employment income of a Status Indian under the Canada Pension Plan. Note: Even though such exempt income is not taxable, it must be reported on line It may then be used to calculate other claims and benefits. To find Line 5363 expand at line 104. T4E Slips - Employment Insurance Enter information from a T4E slip on the T4E screen. Box (7) - Repayment Rate: Be sure to enter the Repayment Rate from Box (7) of the T4E the taxpayer may have to repay a portion of EI Income based on his earnings and the repayment rate.

39 The Tax Shelter Training 39 T4E Continued Box (30) (Found in the Other Information Section of the T4E slip) - Shows the amount of any EI Benefits repaid. When this amount is entered on the T4E screen, it is posted to Line 232 of the return. Box(20) - Taxable Tuition Assistance This amount is included in Box(14) and does not have to entered separately on the screen. This is an amount paid to students while attending a post secondary institution. Generally the taxpayer will be able to claim the Tuition and Education amount while receiving this assistance. Box(21) - Non-taxable tuition assistance This is an amount paid to students taking the ABE program. It is not taxable but must be reported and thus increases the taxpayer's Net Income. It is then deducted on Line 256. Employment Insurance Benefits for Status Indians EI benefits received by a status Indian are not taxable if the benefits relate to employment that was exempt. Thus if all of a taxpayer's earnings were from exempt income, then all his or her EI benefits are exempt. If only part of the earnings were exempt then only part of the EI received will be exempt. If the taxpayer has received EI, the total amount will be shown in Box (14). The amount that is exempt will be shown in Box (18) on the T4E slip. Note: We have found that Service Canada often reports an amount in Box(18) for all Status Indians even though the earnings related to the EI were earned off reservation and thus are not exempt. If the preparer uses the information from Box(18) to calculate the client's taxes, it may not be correct. CRA often removes the amount in Box(18) which increases the taxable income and the client's taxes payable is increased or the refund is reduced.

40 The Tax Shelter Training 40 T5 Slips - Investment Income For more information see Completing a T5 Slip This slip is the most common one issued by banks and trust companies to report Investment, Capital Gains and Dividend income. If both spouses share the earnings from a particular source and the returns are coupled, enter the information from that T5 on the T5 screen for one spouse only. Then enter the percent amount (%) allocated to the other spouse in the field "% allocated to spouse". The appropriate amount will be posted on the Schedule 4 on both returns. DO NOT enter that same information on both spouses returns. If the returns are not coupled, enter only the taxpayer's share on this screen. If the income is shared with some person other than a spouse, enter only the amount earned by the taxpayer. % allocated to spouse T5 Screen Note: Indicate YES if any annuity payments in Box 19 were Received due to the spouse s death. If yes, the taxpayer may be entitled to the Pension Income Amount (Line 314). This will be discussed later.

41 The Tax Shelter Training 41 Dividend Income and the Dividend Tax Credit on T5 Slips When a Canadian Controlled Private Corporation pays dividends to its shareholders, the dividends (plus a grossed up amount) must be included in income even though the corporation had already paid taxes on those earnings. However, the shareholder is entitled to a tax credit to offset the taxes already paid by the corporation. This strange calculation is done automatically by Cantax. Taxable Dividends from a Canadian Controlled Private Corporation (CCPC) is generally shown in Box (11) or (25) on a T5 slip. These dividends are eligible for a special Dividend Tax Credit that is calculated automatically by Cantax and posted to Line 425 on page 2 of the Schedule 1. For more information on the Dividend Tax Credit see Dividend Tax Credit. The amounts shown in boxes 10, 12, 24 and 26 do not have to be entered on the T5 screen. When Taxable Dividends and Interest income is entered on the T5 screen, the taxable amount will be posted automatically to the Schedule 4 and reported on Lines 120 and/or 121 of the T1. Capital gains will be posted automatically to the Schedule 3 and the taxable amount will be reported on Line 127 of the T1. The preparer can assume that foreign income and foreign taxes are reported on the T5 Slip in Canadian dollars. However, in the unlikely case of a country code shown in Box(27) on the T5 slip (see chart below), the amount will have to be converted to Canadian dollars.

42 The Tax Shelter Training 42 T3 Slips - Trust Income For more information see T3 Slip This slip is similar to a T5. Data from the slip can be entered directly onto the T3 screen. Most Common Information found on the T3 Slip Box (50) - Taxable amount of Eligible Dividends Box (32) - Taxable amount of Dividends other than Eligible Dividends Box (21) Capital Gains Box (30) Capital Gains eligible for the Capital Gains Deduction Box (26) Other Income Box (35) Eligible Death Benefits (First $10,000 may be tax exempt) Box (24), (25), (33) and (34) Foreign Income and Taxes Box(46) and (47) - Pension income or Retiring Allowance eligible for transfer (Included in Box(26)) T3 Slip Continued

43 The Tax Shelter Training 43 Foreign Income and the Foreign Tax Credit on T5 and T3 Slips Canadians residents are taxed on world income. If they are taxed in the foreign country on income that has to be reported on a Canadian return they may be entitled to a foreign tax credit to avoid being taxed twice on the same income. Most often we encounter foreign income on a T5 or T3 slip. T5 - Statement of Investment Income Box(15) - Foreign Investment Income Box(16) Foreign Tax Paid T3 - Statement of Trust Allocations Box(24) - Foreign Business Income Box (33) - Foreign Business Income Tax Paid Box(25) - Foreign Non-Business Income Box(34) - Foreign Non-Business Income Tax Paid The information from these slips should be entered on the T5 and T3 screens. Then the FTC schedule must be completed to claim the credit. (See next page).

44 The Tax Shelter Training 44 FTC Screen - T2209 To complete the FTC schedule, each country must be listed separately. In most cases the foreign country on the T5 or T3 slip is the USA. Simply enter USA in "Name of foreign country" field at the top of the first column. If you know that the income is from another country, enter the name of the country in a column by itself. When you have entered the name of the country, go to the T5 and/or T3 screen and enter the country name. (i.e. USA). See next page.

45 The Tax Shelter Training 45 T5 Screen T3 Screen If the total taxes paid to a foreign country is more than 15% of the investment or business income earned, the taxpayer may be entitled to an additional deduction on Line 232. This deduction under Section 20(11) or 20(12) is calculated by Cantax when <Shift>+<F10> is pressed while on the FTC Screen and is posted to Line 232 on Page 3 of the T1.

46 The Tax Shelter Training 46 T4A - Statement of Pension, Retirement, Annuity, and Other Income For more information seet4a Slips This slip is used to report a number of sources of income including pensions, self-employed commissions, lump sum payments, annuities, fees for service, Scholarships and other income. Information from this slip is entered on the T4A Screen. Continued on next page

47 The Tax Shelter Training 47 T4A Slip Summary Continued

48 The Tax Shelter Training 48 Some Boxes on the T4A require a closer look Annuity Income Expand at field (024) on the T4A Screen to enter the amounts. The footnote on the T4A slip should identify the amounts to enter as an Income Averaging Annuity Contract (IAAC) { Box(111) }or a Deferred profit Sharing Plan (DPSP) { Box(115) }. The remainder should be reported on the first line { Box(024) }. Any amounts in Box(111) and/or Box (115) are included in Box (024) on the T4A slip. These amounts are included in Box (024) Example: Using the T4A slip above, enter the amounts on the T4A Screen and sub screen. Expand at field (024) on the T4A Screen and enter the amounts shown in the footnotes Box(111) and Box(115). The amounts not reported in these two boxes must be reported in field (024). Total $1, Less ($ $479.30) = $87.40 The total of the three amounts is $1, It is important to note that the way the income in Box (24) is reported may affect certain claim such as "Pension Income Splitting" and /or "Pension Income Amount". These will be discussed in detail later in the course.

49 The Tax Shelter Training Self-Employed Commissions and Fees for Services Amounts reported in Box (020) and Box (48) are Self-Employed Earnings. Taxpayers receiving that type of income can generally claim expenses on Form T2125. This income must be reported on a business income and expenses form. To report the income on a T2125 (Business Income and Expenses), a check mark must be entered in the field "Carry the amount from box 020 or 048 to Form 2125". The name of the business must first be entered on the T2125 Schedule. Business Income and Expenses will be discussed in detail in Part 7 of this course. Form T2125

50 The Tax Shelter Training Other Income Expand at field (028) to enter the amounts. Since 2011 the following section has been added to report any amount in Box (028) that is selfemployed income. As with income reported in Box (020) and Box (048) the name of the business must first be entered on the business form Research grant The actual amount that should be reported in the field on the "T4A Other Income Screen" is the Net Research Grant after related expenses are claimed. The expenses that can be claimed include (a) travelling expenses, including all amounts for meals and lodging while away from home in the course of doing research work, (b) fees paid to assistants, and (c) the cost of equipment, and laboratory fees and charges , 105.2, and Scholarships (study grants), fellowships, bursaries If the student is attending an eligible university or college in Canada, any scholarships, fellowships and bursaries do not have to be included in income (Code 105.1). Generally, students attending full time programs at University or Technical School in Canada are eligible for the full exemption

51 The Tax Shelter Training 51 In other situations the student may be allowed an exemption of $ (Code 105.2) and in other cases the student may have to report the full amount as income (Code 105.3). If a taxpayer received a scholarship, fellowship, or bursary received in connection with a parttime program for which the part-time education amount can be claimed, the scholarship exemption is equal to the amount of tuition paid for the program plus the costs of programrelated materials plus $ (Code 105.4). To enter the amount, expand a field 105 and enter the amount in the appropriate field. When the income and corresponding code are correctly reported, Cantax will post the proper amount to Line 130 of the return Death Benefits A death benefit is an amount paid to the beneficiary after a person's death for that person's employment service. The first $10, of death benefits is not taxable. The preparer must enter the full amount of the benefit shown in Box 106 on the T4A Slip Summary Screen. Then expand at Line 130 and enter the $10,00000 exemption on the appropriate line. Note that this $10, exemption does not apply to the Canada Pension Plan Death Benefits.

52 The Tax Shelter Training Income from wage-loss replacement plan, not fully funded by employee premiums If a taxpayer has received a T4A slip showing income from a Wage-Loss Replacement Plan (Box 107), the full amount may not be taxable. If the plan was fully funded by the employer, the full amount is taxable. If the plan was not fully funded by the employer and the taxpayer has paid premiums to the plan since 1967 he/she can deduct those premiums from the income less any amount that was claimed in a previous year. If the plan was fully funded by the employee, then the income is not taxable and no T4A slip should be issued. Example: A taxpayer received a T4A Slip showing taxable payments of $7, in Box(107) from a wage loss replacement plan. Since 2007, the taxpayer has paid premiums of $1, into the plan and has not deducted any amount in a previous year. The T4A screen is completed as below. The taxable amount ($7, $1, = $6,027.11) will be posted to Line 104 on Page 2 of the T1.

53 The Tax Shelter Training 53 T5007 Slips - Workers Compensation or Social Assistance Note: Social Assistance received while two spouses (including common law) are living together must be reported on the spouses return with the higher income. In a case where the spouses started living together or separated during the year, the income may have to be prorated. T4A(OAS) Slip Old Age Pension and Foreign Pensions For more information see Line Old Age Security Pension Old Age Pension and Supplements are included in income on Line 113 and thus affect the taxpayer's Net Income. The Supplements are then deducted on Line 250 so that it is not taxable to the taxpayer.

54 The Tax Shelter Training 54 Information from this slip is entered on the T4A(OAS) screen. Foreign Pension Note that this screen is also used to enter pensions from foreign sources. US Social Security US Social Security is taxable in Canada and must be reported in Canadian funds. This pension is eligible for the Pension Income Credit. In addition there is a special 15% deduction on line 256. For Canadian residents who have been receiving this pension prior to 1996, the amount of the exempt pension is 50%. This will automatically be claimed on Line 256. Place a X in the box to indicate that the taxpayer has been receiving the pension since then. Exempt Foreign Pensions Some foreign pensions are exempt from taxes in Canada but may affect the Net Income of the taxpayer. These amounts should be reported in Canadian funds. They will automatically be added into income at line 115 and deducted at line 256. Other Foreign Pension Income and Taxes If a taxpayer receives a pension from another country (other than U.S. Social Security or Exempt foreign pensions), the income and any taxes must be reported in Canadian funds. Enter the amounts on the Other foreign pensions and Foreign tax paid lines. The taxpayer may be entitled to a Foreign Tax Credit. This is claimed on the FTC (T2209) Schedule. This credit is claimed the same way as on the T5 and T3 slips.

55 The Tax Shelter Training 55 T4A(P) Slips Canada Pension For more information see Line CPP or QPP Benefits Boxes (14), (15), (16) and (17) - If a person receives Retirement, Disability, Survivor or Child Benefits, the T4A (P) slip will come in the name of the person who received the benefit. The SIN number of the recipient will be shown on the slip. That income must be reported as income of the recipient. Box (18) CPP Death Benefits If a CPP death benefit is received upon the death of a person, the income is NOT reported on the return of the deceased. The income must be reported on the beneficiary s return(s) or on a T3 trust return for the estate of the deceased. If the spouse is the beneficiary, it should simply be reported on his/her return. If there are a number of beneficiaries, it may be better to file a T3 trust return and pay the taxes through the trust.

56 The Tax Shelter Training 56 T4RSP Slips Registered Retirement Savings Plan Income For more information see Line Registered Retirement Savings Plan (RRSP) income Name of Annuitant SIN of Annuitant SIN of Contributor If the annuity payments in Box 16 were received due to spouse s death, the taxpayer may be entitled to the Pension Income Amount. If this situation applies, enter "Yes" at this field. Funds withdrawn from a Spousal Plan If the annuitant withdraws funds from a spousal plan (Box 24 is Yes ) and the spouse of the annuitant has contributed to any spousal RRSP in the past three years, the contributing spouse, rather than the annuitant, may have to include in income all or part of the funds withdrawn. To determine the amount to be included as income for the annuitant or contributor complete Form T2205, Amounts from a Spousal or Common-law Partner or RRIF to Include in Income. Note that in any case the annuitant must report the full amount of the taxes deducted in Box (30) on his/her return. The annuitant must include the full income and taxes on his/her return if they are separated or divorced or the contributor is a non-resident or is deceased.

57 The Tax Shelter Training 57 T4RIF Slips Registered Retirement Income Fund Income For more information see T4RIF The preparer should take special note of any amount in Box(24) if any amount has been rolled over to an RRSP or another RIFF. Box 24 - Excess Amount The amount in Box 24 on the T4RIF is included in Box 16 and represents an amount received that is in excess of the amount that is required to be paid for the year. It is fully taxable unless it is transferred to an RRSP or RRIF. This transfer must have been made directly into the fund. The client must have an official receipt verifying this transfer under Section (60). The full amount must be reported in the first Excess amount Box(24). The receipt amounts should be reported in the second or third Box 24 as appropriate. Note: If this is a spousal plan, the same three-year rule applies as with an RRSP. A T2205 may have to be completed. Example: A Client received a T4RIF slip showing an amount of $14, in Box(16) and $8, in Box(24). He has a receipt showing that $ was transferred directly into an RRSP under Section (60) of the Income Tax Act. How should the income and transfer be reported. The client must have a receipt for the amount of the transfer.

58 The Tax Shelter Training 58 T4PS Slips Statement of Employee Profit-Sharing Plan Allocations and Payments (556.87) If the amount in Box (34) has brackets around it, it is a Capital Loss and you must enter a negative sign in front of the number on the screen. Note that this information slip is used to report dividends, capital gains and losses and foreign income for employees as part of a profit sharing plan. Foreign income and taxes are treated the same as on the T5 and T3 slips.

59 The Tax Shelter Training 59 RC62 Slips - Universal Child Care Benefit Statement- Line 117 The universal child care benefit (UCCB), which was taxable, was replaced by the Canada child benefit (CCB), which is tax free, in Only individuals who received UCCB retroactive payments in 2017 or have repaid overpayments in 2017 will receive a 2017 RC62 slip. Retroactive payments are indicated in Box 10 and repayments are indicated in Box 12 of the RC62 slip. RC210 Slips - Working Income Tax Benefit Advance Payments Statement Box 10 - Working Income Tax Benefit Advance Payments This is the portion of the Working Income Tax Benefit that was issued as Advance Payments for the Tax Year indicated on this statement. Enter this amount on the RC210 Screen.

60 The Tax Shelter Training 60 T5018 Slips - Statement Of Contract Payments Box (22) shows the amount of Construction subcontractor payments. This amount must be entered directly on a Statement of Business Income and Expenses T2125. T5013 Slips Statement of Partnership Income A taxpayer receiving a T5013 is a member of a partnership. The type of income earned in the partnership ranges from Investment Income, Rental Income, Capital Gains and Dividends. In addition, the partnership may incur losses that can be deducted by the taxpayer. When the information from this slip is entered on the T5013 screen in CanTax, the amounts are posted to their appropriate schedules and lines on the T1.

61 The Tax Shelter Training 61 Quebec Earnings RL-1 A taxpayer may have earnings from Quebec yet is a resident of another province on December 31 and thus will not file a Quebec return. Since residents of Quebec on Dec 31 must file both a federal and provincial tax return, they are issued both a T4 slip and a Releve 1 slip from the same employer in Quebec. The T4 slip will show total earnings and federal taxes deducted as well as premiums paid for the Quebec Pension Plan (QPP) and EI. The Releve 1 slip will show total earnings and the Quebec taxes deducted as well as the QPP and EI. Box A Employment income before source deductions Box B Contribution to the Québec Pension Plan (QPP) Box C Employment insurance premium Box D Contribution to a registered pension plan (RPP) Box E Québec income tax withheld at source Box F Union dues (line 373) Box N Charitable donations and gifts Box J Employer contribution to a private health services plan. May be included in medical expenses. Reporting Information From The Releve 1 and the T4 When preparing a return for a taxpayer with a Releve 1 Slip and a T4 Slip from the same employer, be aware of the following. Total Earnings - Box (14) on the T4 and Box (A) on the Releve 1 show the same amounts and should be entered only once in the Box (14) field on the T4 screen. Quebec Pension Premiums (QPP) - Box (17) on the T4 and Box (B) on the Releve 1 show the same amounts and should be entered only once in the Box (17) field on the T4 screen. Employment Insurance Premiums Box (18) on the T4 and Box (C) on the Releve 1 show the same amount and should be entered only once in the Box (18) field on the T4 screen. Income Tax Deducted Box (22) on the T4 shows only the federal taxes deducted while Box (E) on the Releve 1 shows only the Quebec taxes deducted. The taxpayer must be given credit for both of these taxes. The amount in Box (22) on the T4 and the amount in Box (E) on the Releve 1 must be added together and entered in the Box (22) field on the T4 screen. Other amounts on the Releve 1 can be ignored as they either apply to the Quebec provincial return or the amounts are included on the T4 slip, which should be entered directly on the T4 screen.

62 The Tax Shelter Training 62 Foreign Income and Foreign Tax Credit Employment Income from Foreign Employer Canadians who are still considered Canadian residents for income tax purposes must report their world employment income (in Canadian funds) on the Canadian T1. They may also be entitled to a Foreign Tax Credit if taxes were paid the foreign country. Use the Bank of Canada exchange rate that was in effect on the day the income was received or, if the amount was paid at various times throughout the year, the average annual rate may be used. Exchange rates for various countries can be found using the Help feature of Cantax. Select Help / Contents and Index / Index Tab. Type exchange in the blank search field. The first item at the top of the list will be Exchange Rates. Click on Display to show the rates.

63 The Tax Shelter Training 63 Foreign employment income from a foreign employer should be reported on the bottom part of the T4 screen in the field Other employment income not reported on T4/T4A Slips. Cantax will automatically post the income to Line 104 on page 1 of the T1 Foreign Tax Credit on Employment Income from Foreign Employer If the taxpayer has paid taxes the foreign country, he/she is entitled to claim a non refundable Foreign Tax Credit so that he/she does not pay double taxes on the same income. If the client has or will receive a refund of the foreign taxes from the country where employed, he/she is not eligible for this credit. The income received from a foreign employer and the taxes paid to the foreign country (in Canadian dollars) must be entered on the FTC screen in order to claim the Foreign Tax Credit. When this is done the credit will be posted to the Schedule 1 and the provincial Schedule 428. Example: A taxpayer shows you information that he has earned income from Chile. His gross income is 61,106, pesos and the taxes deducted that will not be refunded is 8,068, pesos. Using the exchange rates shown in Cantax Help we see that the exchange rate for the Chilean peso is Conversion 61,106, peso X = $125, Ca 8,068, peso X = $16, Ca Report income (in Canadian Dollars) on the bottom part of the T4 Screen. It will be posted to Line 104 on the T1. Complete the FTC Screen to claim the Foreign Tax Credit. (See next page)

64 The Tax Shelter Training 64 Enter name of country Enter Foreign Employment Income here. This amount has already been entered on the T4 Screen Enter taxes paid to a foreign country on employment income reported above The Foreign Tax Credit will be posted to Line 405 on the Schedule 1.

65 The Tax Shelter Training 65 Income Not Reported on Slips For more information see Line Employment income not reported on a T4 slip GST/HST Rebate Received in Previous Year If an employee paid and deducted employment expenses in the previous year, he/she may have received a GST/HST rebate on those expenses. If so, include on line 104 the rebate received. To enter this amount, expand on Line 104 of the T1 and then expand at the GST rebate received line and enter the amount on the top of the Employee and Partner GST/HST Rebate Application. This will be discussed in more detail later in the course. Note: This is not the same as the GST/HST credit received by many taxpayers. Jury Duty Income from jury duty is taxable and must be reported on Line 130. Expand at Line 130 to see a list of other incomes to be reported. Tips, Gratuities and Casual Labor Tips, gratuities and casual labour not shown on an information slip should be reported in the field Other Employment Income not reported on a T4/T4A slips. Support Payments Received For more information see Line 156 and Support payment received Taxpayers must report the total amount received on Line 156 and the taxable amount on Line 128 (These fields will have to be overridden unless the preparer uses the Cantax worksheet by expanding at Line 156 or 128). Child support is not taxable to the recipient nor is it a deduction for the payer. Spousal support is taxable to the recipient and deductible for the payer.

66 The Tax Shelter Training 66 Income that Must be Self-Reported Some income earned and losses incurred by taxpayers is not reported on slips and thus, it is the responsibility of the taxpayer to report this income or loss. These include income or loss from a business, rental property and the sale of property and shares. The reporting of these types of income and expenses require the completion of special forms. These will be discussed in detail later in the course. Non-Taxable Income (which does have to be reported) Some types of income are not taxable to the recipient but may affect the amount that another person may claim for that recipient as eligible dependant, disability amount, etc. In addition, these types of income may affect the WITB, NL Low Income Reduction, GST/HST rebate and access to other assistance or income. These must be entered on the return but will be deducted before Taxable Income. These non-taxable amount include: Workers Compensation (T5007 Slip) Social Assistance (T5007 Slip) Federal OAP Supplement (T4(OAS)) Certain Foreign Pensions Non-Taxable Income (which does NOT have to be reported) Some types of income are not taxable and do not have to be reported on the T1. These include: GST/HST Credit (Do not confuse with GST/HST rebate on employee expense) Child Tax Benefit Lottery Winnings Vets Allowance or Disability Pension Inheritance Victims Compensation Foster parents payments Income of Indians on Reserves Strike Pay Non-Taxable Employment Benefits The following are non-taxable benefits that can be received from an employer. discounts on employer s merchandise subsidized meals the cost for distinctive uniforms/clothing and cleaning reimbursement of moving expenses two non-cash gifts up to a total of $ per year use of employers recreation facilities employer mandated medical examinations employer sponsored personal counseling services travel for business when reimbursed on a per kilometer basis tuition if the course is required for your employment employer allowance for an employee's child to attend the nearest suitable school

67 The Tax Shelter Training 67 Part 1 Exercise Complete this exercise and compare it to the solution on our website. Solution to Part 1 Exercise Fred Janes (SIN ) was born on Dec 12, He is a single person with no dependants and received the information slips below. He was resident in NL at the end of the year. Fred has been paying part of the premiums to the Wage Loss Replacement Plan since He has paid a total of $ and has not claimed any amount of those premiums on a previous return. Fred has an RRSP receipt showing that $2, was transferred directly from a RIFF under Section (60) of the Income Tax Act. Fred and his mother, Mary, have a joint savings account at BMO. (T5 included). Fred has contributed 30% of the savings in the account. After you have completed the return, check the solution on the Tax Shelter web page.

68 The Tax Shelter Training 68 Part 1 Exercise Continued KHJ Co 6, , Janes, Fred 109 2, GHF Co Janes, Fred 107 6,

69 The Tax Shelter Training 69 Part 1 Exercise Continued 79.51