...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.
IDENTIFICATION OR
HEADING
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.
