Personal Income Tax




Personal Income Tax

When is my T1 Return due?

Generally, your return has to be filed on or before April 30. If you or your spouse or common-law partner carried on a business in the taxation year (other than a business whose expenditures were mainly in connection with a tax shelter), your return has to be filed on or before June 15.
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What's the penalty for missing the deadline to file your personal income tax return?

You should always send your tax return by the annual deadline. Even if you'll have a balance owing that you can't pay right away, you should still file on time to avoid the late-filing penalty.
The late-filing penalty is:
¢ 5% of the balance owing; and
¢ An additional 1% of the balance owing for each full month that your return is late, to a maximum of 12 months.
¢ NOTE: The penalty may be higher if you've already been charged the late-filing penalty in any of the three previous years.
If you missed the tax-filing deadline because of circumstances beyond your control, CCRA may waive the penalty and applicable interest.
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Do I have to file a return?

You have to file a return for the tax year if any of the following applies:
¢ You have to pay tax for the tax year;
¢ We sent you a request to file a return;
¢ You have a taxable capital gain or disposed of capital property (such as real estate or shares) in the tax year, or you claimed a capital gains reserve on your prior year tax return;
¢ You have to pay back any of your Old Age Security or Employment Insurance benefits
¢ You have not repaid all of the amounts you withdrew from your registered retirement savings plan (RRSP) under the Home Buyers' Plan or the Lifelong Learning Plan; or
¢ You have to contribute to the Canada Pension Plan (CPP). This can apply if, for the tax year, the total of your net self-employment income and pensionable employment income is more than $3,500.
Even if none of these requirements applies, you may still want to file a return if any of the following applies:
¢ You want to claim a refund;
¢ You want to apply for the GST/HST credit;
¢ You or your spouse or common-law partner wants to begin or continue receiving Canada Child Tax Benefit payments;
¢ You have incurred a non-capital loss in the tax year that you want to be able to apply in other years;
¢ You want to carry forward the unused portion of your tuition and education amounts; or
¢ You received income for which you could contribute to an RRSP. To keep your RRSP deduction limit up to date, you would have to file a return.
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How long do I have to retain books and records for income tax purposes?

The general rule is that books and records have to be kept for a minimum of six years from the end of the last tax year to which they relate. The tax year is the fiscal period for corporations and the calendar year for all other taxpayers.
Some exceptions are:
¢ For corporations, records have to be kept for two years from the date of dissolution (in the case of amalgamations or mergers the books and records have to be retained on the basis that the new corporation is a continuation of each amalgamating corporation) and
¢ Books and records may be destroyed at an earlier time than outlined above if you request and receive written permission from the minister.
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How much should I contribute to my RRSP's?

Making the maximum contribution to your RRSP is likely the safest tax-sheltered investment available. The immediate benefits are twofold: tax savings in the year of contribution, and tax-deferral on the income earned by the RRSP investments until withdrawal, hopefully at the time when you retire. Generally, the maximum amount that is tax-deductible is 18% of your previous year's earned income to a maximum of $18,000. Earned income includes: salaries or wages net of employment expenses claimed; research grants; royalties; net income from self-employment; net rental income from real property; alimony and maintenance received; and supplementary unemployment benefit plan payments.
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What happens if I over contribute to my RRSP?

If you contribute more than your contribution limit, you will be subject to a 1 percent penalty tax per month to the extent that the over-contribution amount exceeds $2,000.
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What do I deduct from my employees' paychecks?

You're responsible for deducting income tax, Canada Pension Plan (CPP), and Employment Insurance (EI) premiums from your employees' paychecks. You are also responsible for remitting this money to Revenue Canada at regular intervals, usually on or before the 15th day of the month following the month in which you deducted it. It's a good idea to remit payroll deductions on time. If your payment is late, you will have to pay a penalty.
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Does my business have to register for the G.S.T.?

You need to register for a GST/HST account if you business meets one of the following requirements:
¢ Your annual worldwided GST/HST taxable revenues, including the taxable revenues of all of your associates, will be more than $30,000;
¢ you operate a taxi or limousine
¢ you are a non-resident who solicits orders in Canada for goods sent by mail or courier and your annual worldwide GST/HST- taxable sales will be more than $30,000; or
¢ you are a nonresident and you charge admission directly to audiences at activities or events in Canada.

If your goods and services are GST/HST taxable, but your sales are less than
$30,000, you may choose to register voluntarily.

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What penalties and/or interest are involved with G.S.T?

CCRA charges penalties and interest on:
¢ any net tax still owing after the due date;
¢ late or insufficient installment payments; and
¢ unpaid penalties and interest

The penalty is 6% a year. CCRA charges interest at a prescribed rate that is adjusted quarterly. CCRA calculates the penalty and interest from the day after the due date of the demittance to the day we receive it. The penalty and interest are compounded daily.
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Tarrabain Accounting - Phone: (780) 468-1898 - Fax: (780) 468-9354

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