The second situation where two returns are filed is when a person has declared bankruptcy. In this case there are two returns in the year of bankruptcy. One return is usually filed by the trustee and includes all income up to the day that he or she was appointed trustee.
The second return includes all income from that day to the end of the year. Both of these returns contain full exemptions and since whatever income is earned results in a lower marginal tax rate, there is usually enough in the first return to pay the trustee's fees and the second return gives the bankrupt person a little boost to help get started. Be careful though. I see some people sign away the second refund with the first. To my knowledge, there is NO onus on the bankrupt person to turn over the second refund to the trustee.
I did a lot of work the summer of 1988 on one return, only to find out that the trustee had already filed it and appropriated the refund for his fees.
As an example, if a married person with 2 children and a non-working spouse were making a gross of $1,500 per month and were to go bankrupt on June 30th, there would be no tax to pay. Any tax deducted in the first nine months would be a refund because the exemptions exceed the $9,000 earnings (plus 1/2 the family allowance) and the taxpayer would receive a refund which would go to the trustee. The second return marked "POST-BANKRUPTCY" would also have a total refund because the exemptions would again exceed the $9,000 gross income. This second refund should go to the taxpayer. In addition, the spouse would be entitled to the child tax credit if the spouse was the mother. (If it was a non-working father and a working mother, she would get her child tax credit with her refund).
Do not try to fool the government when answering these questions " I guarantee that it will cost you money. Why? Well, I personally know of nine other people with my name. I have received a receipt in the mail for David "L" Ingram. There are over 70 John Smiths in the Toronto phone book, and many J. Smiths. So you must put down your correct date of birth and correct social insurance number " as well as your name " to identify yourself properly.
If you do not, you could be in the position of one New Westminster woman who received the wrong Canada Pension Plan benefits; or, even worse, you could lose two and one-half years of old age pension benefits " as happened to one lady in Vancouver.
This last case is not uncommon because many people lie about their ages. I feel that apart from personal vanity, there are at least two other reasons for not reporting your correct age: 1) to keep a job after the age of 65, and 2) to get a job before the age of 16 or 19. In both cases, people who lie may contribute needlessly to the Canada Pension Plan (since contributions before you reach 18 or after your 70th birthday do not count for CPP purposes).
In one such case, I was preparing a very nice lady's 1973 tax return in my Vancouver office. She gave me a date of birth which made her 58. To put it nicely, I did not believe her and casually mentioned that it was too bad that she was not seven years older. Her ears perked up. "Why?" I explained to her that there was an extra exemption at the age of 65, and that she would get more money back. She then informed me that she was really 68, but had changed her birth date to keep her job because retirement was mandatory at the age 65.
Because she could not afford to retire, and in fact wanted to keep on working, this woman had forfeited several thousand dollars. She had forfeited two and one-half years of old age security benefits and two years of extra old age exemptions.
Yet employers do not see their employees' tax returns, nor do they have the right to see them. So if you want to tell a few white fibs about your age to your employer, that's between you and your conscience. But for your own sake, set the record straight on your tax return, otherwise it could cost you money.
Luckily, however, all was not lost in this lady's case. By refiling her 1971 and 1972 tax returns, we retrieved for her two years of old age exemptions, and we were also able to get a lump sum settlement of over one thousand dollars from old age pension. Today, in 1990, the same scenario could result in over ten thousand dollars.
So I take this time to make an important point. If you see something in this book that you have missed when filing past tax returns, you can correct and usually change your return for three years back. Don't just sit there, do it!! Today, in 1991, I still see one person a month who is working with an incorrect age because they changed it to get a job.
The social insurance number is another important part of the heading section, for the S.I.N. is the only record and control that the government has of your contributions to the Canada Pension Plan. I have had a client with eleven social insurance numbers. He was fooling no one but himself. He felt that with all these numbers the government would lose him, and he was partly right. In fact, what this married man with three children was doing was wasting the money he was contributing to the Canada Pension Plan in different numbers.
If you are married, the spouse's social insurance number must be filled in as it allows the tax department to reconcile net incomes. If you do not fill it in, it could delay your refunds until the tax department gets the correct numbers.
Finally, the type of work you do and the name of your present employer is important for a very good reason. I have never seen this information misused, but I have seen it used to track down taxpayers for the purpose of sending them refunds.