The first thing you will notice is that there are numerous references to other years returns in this book. This is because it is a reference for ALL tax years. You have three years from the date of Assessment to amend a tax return. "SO", if you see something here that affects your 1987 return and it was filed in April, 1988 and assessed July 25, 1988, you have until July 24, 1991 to amend that return. It is always advisable to file a Waiver (form T2029) which can be found in the forms section at the back of this book.
LINE 101 -- EARNINGS FROM T4 SLIPS
This line refers to and asks only for income from employment (working for wages paid by someone else); it does not ask for any other income figures. Only those amounts shown on T4 slips from your employers should be shown here. Remember, list only those amounts in Box C of the T4 slips; do not add in amounts from any other boxes.
Something that happens a lot is that at tax time you haven't received a T4 from some job that only lasted for a few days. Still, you know that you were paid and that deductions were made. It does not do you any good to pretend that the job didn't exist. A T4 probably was issued and, especially if you have moved during the year, it probably went to the wrong address.
If you leave it out of your tax return, then at Christmas time eight or nine months later, you will get a notice from the big computer at Revenue Canada saying that your return was re-assessed because of additional information received, and now you owe so much more in taxes. Or, if it doesn't write anything to you, it could very well mean that you have missed out on a further refund. Leaving amounts out like this affect your GST and Child Tax Credits as well. Far better to get them in the first place.
In a self-assessing system the responsibility is yours to make sure that all of your employers have your right address. If you have done that and by March 1 you are still missing T4's write again to those missing employers reminding them of their legal obligation to have the T4's out by February 28. If after another 10 days that hasn't worked, write, or better still, visit the District Taxation Office in the district where the employer is located giving the employer's name and address, and they will either provide you with the information on their copy of the T4 or take steps to find out why it isn't there. If you're still getting nowhere, estimate the amounts of income and deductions, preferably based on those pay stubs which you should have been saving all year. Estimating the deductions is also important; we have seen returns where only the income was estimated but not the tax, and because only the income was estimated those people weren't given credit for the tax that was already paid. In December, 1990 a taxi driver brought in his T4 slips along with some pay stubs. One pay stub showed more tax deducted than the entire T4 slip showed. It turned out that the owner of the company was shortchanging his employees drastically. What he was doing was crediting his own T4 slip with the tax deducted from his drivers when he thought that the drivers were not keeping track. Three part-time drivers received credit for another $3,000+ more tax deducted on their T4 slips.
IMPORTANT -- In November 1986, I was preparing a return for an employee of a very large organization with a "profit sharing plan". This company was issuing a special T4PSP for the amount of the benefit of the profit sharing plan. However, the employee really worked for a wholly owned subsidiary of the same company. The actual employer also included the benefit as a taxable allowance and benefit on the T4 slip. When I spotted this, I checked and found that the 1984 return had reported the income twice as well. In fact there was a $1,000 refund due the employee because of bad record keeping by the employer. The eventual results are that over 1,000 employees will be getting back $500 to $2,000 for a total refund of over $1,000,000. Please check your slips. We once had a large Forest Company reissue over 7,000 T4 slips, and a Bank reissue many T5 slips; they are not `always' correct.
WORKER'S COMPENSATION PAYMENTS
If you have received Worker's compensation payments either directly or through your employer, DO NOT INCLUDE those amounts here. Do attach the covering document to the tax return to show why the amount is not included here. (Keep a photocopy of all covering documentation). NOTE -- WCB Payments do go on Schedule 7 (Child/Federal Tax Credit).
Maurine received a total of $18,000 wages in 1989 but $6,000 was paid to her employer by the WCB. She has a letter from her employer stating that $6,000 of the $18,000 was paid by worker's compensation.
Maurine will report only $12,000 on line 101. She will include the letter with her return. If you do not have a letter or if the amount is not shown as a note on your T4 slip, get a note or letter to attach to the return before sending it in. If you do not get a note first, it will delay the processing of your return.
LINE 102 -- COMMISSIONS
This line should include the total of the amounts in Box P (88/89/90 returns) or Box L (1984, 85, 86 or 87 returns) of all your T4 slips. It is important to put in these amounts as they determine your allowable expenses on line 229. Do not add line 102 to line 101; it is already included. If you now realize that you reported your commissions twice in 1986 or 87, you still have a chance to correct it. This is an extremely common error that people make. In 25 years in the tax preparation business, I have never seen Revenue Canada correct this obvious error and issue a refund unless it was brought to their attention. I HAVE seen an auditor completely ignore a double reporting of $12,000 of commissions while hounding a commission salesman because he did not have a log recording his car expenses. In that case, we got an extra $5,000 back for the client. The DNR assessor had to have seen it in my opinion.
LINE 104 -- OTHER EMPLOYMENT EARNINGS
This line is for adult training allowances (such as that from the Canada Manpower Training Program), net research grants (attach a schedule), tips and gratuities. Properly, any other income from employment such as that on a T4A for taxable fringe benefits when your employer pays your Provincial Government medical insurance also belongs here; if you are in a low income group, this could affect the calculation of the employment expense deduction by a few dollars. Enter any wage loss replacement (box H of T4A slips) that you have received on this line also -- not under "other income". PLEASE NOTE -- If YOU paid your own premiums for the wage loss replacement insurance, it is not taxable `even if you receive a T4A slip'. I have just finished with one gentleman who received over $4,000 a month tax free in 1989 because I told him to pay his own wage loss insurance in 1976 and it did not cost a cent. We simply had the company pay him his premium amount in cash (it is a taxable benefit anyway) and he paid the premiums direct. The company still got the deduction, and he received his wage loss insurance tax free. Consider this with your own company. Interpretation Bulletin IT-428 will explain this more. You can get this bulletin from your local Taxation Office free of charge.
If you work in a job at which you receive tips, you must report your tips here. Failure to report tips can leave the taxpayer open to severe penalties. Legally, there is no acceptable percentage for this line. All tips are supposed to be reported -- although the practice in the industry is to report as little as possible.
The tax department has been known to conduct audits on waiters and waitresses by sending in someone "undercover"! It is not hard to report the exact figure. Simply keep a separate notebook and write down the amounts of the day's tips each evening. Remember, a record is kept of all tips from VISA, MasterCard, American Express and other charge cards. Income earned abroad, most often in the U.S., is also reported here.
You can elect to pay Canada Pension Plan on your tip income. Obtain form CPT20 from Revenue Canada (or use the one from the back of this book) and submit it by May 1, 1991. (this could increase your CPP for life. For more details on pensions, see david ingram's INVESTMENT/RRSP book published by Hancock House and available in all book stores or from myself at the address in the front of the book.
For 1988, 1989, and 1990, amounts that used to go on line 109, are now on line 229.