...TAX RETURNS SCARE PEOPLE.
There is so much verbiage that the average person gets lost in a maze of paper work, only to find out in the end that most of it has nothing to do with him anyway. In fact, if the return is broken down into its basic components, the average taxpayer will find the return much less confusing.
Quite simply, there are now five basic parts to any tax return:
1. The heading - lets them know who you are.
2. Total income calculation - lets you know how rich you really aren't.
3. Deductions - tells them how hard you tried to do what the government wants you to do.
4. Calculation of non-refundable tax credits
5. Tax calculation - tells you the bad news.
If at this point or any point along the way you become too confused to do anything right, get help. There is no shame in needing help with your tax return. We have many university professors as clients needing help with the same thing. Of course, we would prefer that you came into a CEN-TA office, or bought our TAXABILITY computer package (that's what we're in business for), but if you don't come in to see us, even some of the worst people in the business will often raise points that you would never have thought of by yourself, and their mistakes could be exactly what you've needed to start you on the way to some big savings.
WHO MUST FILE?
As far as the government is concerned, anyone who has taxable income must file. Does this mean that if you have no tax to pay, you do not file? No. You must file. If tax has been withheld at source but no tax is payable you must file in order to obtain a refund. The child tax credit, the old federal sales tax credit for 1986, 87, 88 and 89 and the GST refund for 1989 and 1990, and the provincial tax credits, are payable as income tax refunds.
You may have had a bad year in your business or as a commission salesman, and may be able to claim a loss which could be used as a deduction either in previous years, or in subsequent taxation years. If you lost your shirt on the stock market and you have no other income from which to deduct the loss, file anyway. The loss must be claimed in the year it was incurred in order for you to be able to carry it back, otherwise you could lose a possible deduction.
You must file if you received a Child Tax Prepayment in 1990, or if you disposed of capital property in 1990 or if you made over $2,800 as a self employed individual to pay the Canada Pension Plan contributions. AND, in 1989 and 1990 you file to include your Goods and Services Tax Refund.
Are you a recent immigrant or thinking of emigrating? Since your personal exemption is prorated, based on the number of days you resided in Canada, you may have a tax liability even though your income is relatively small.
If you are considering moving abroad, and keeping the family home for a while in the event that you may one day return to Canada, you are still required to file a tax return. You may be "deemed" to be a continuing resident, or if you rent the home, you are still liable for taxes. Since Canada has tax agreements with other countries, make sure you have competent help before you leave - the tax department has very efficient means for tracking people down.
For more information on cross - border problems, get David Ingram's BORDER BOOK, On sale now at your favorite bookstore with customs duty rates for 91, 92 and 93 and details about how to Import An Automobile into Canada, Firearms, Endangered species imports, excise rates, etc.
The heading is the most important section of the tax return. In the heading you will find questions regarding your name, address, date of birth, social insurance number, and type of employment, the name of your current employer, and the date you became or ceased to be a resident of Canada. But, the most important reason for getting this section correct is that your refund will be delayed if it is wrong. A second reason is that your Canada Pension Plan Benefits could end up in limbo.
Pay particular attention to the section on entering or leaving the country. Remember, Canada considers you to remain a resident of Canada for the whole year's income for Tax purposes if you have been in the country for more than 183 days. This means that if you live in Canada until July 31st, and move to the States and earn money in the States, Canada maintains a claim to tax on that money earned `out of the country' even if you have no intention of returning to Canada. Check with a competent tax consultant if you are entering or leaving the country on a permanent basis.
In these cases, you would not show a date of departure. Some situations when you would be considered to be a resident of Canada for Tax purposes even though you did not live here would be:
Members of the armed forces stationed outside of Canada
Members of the School Staff on Canadian Bases in other countries
Federal or Provincial employees if they were residents of Canada before going abroad (i.e. if you work for the Canadian Government in an embassy in Finland, but are a Finnish Citizen and did not live in Canada before you were hired, you are not subject to Canadian Income Tax unless they received a representation Allowance for 1989 or the year in question).
Individuals working for one of Canada's International Development Assistance Programs unless they were resident in Canada at any time in the three month period immediately before beginning their duties abroad. (Be careful here, we lost this case for a 1973 return when the Taxpayer, a US Citizen, signed a contract to work for CIDA while visiting his son in Vancouver. He had been in the country for a couple of months and regulation 3400 snuck up on him. If you get the urge to sign a CIDA contract and you are not a Canadian, leave the country for ninety days, and preferably sign the contract while out of the country as well.
Dependent children of the above.
Spouses of those persons above who were ever previously resident in Canada. (i.e. if you are a German National and marry a Canadian on a foreign base, you are NOT liable for Canadian Income Tax unless you have lived in Canada previously).
Bulletin IT-221R2 will be handy for determining your residency status. It is available from your local DNR office.
Next: Deceased Taxpayer
CEN-TA Cross Border Services - Tax, Visas, Immigration