Tackling the Tax Return: Getting Started

It’s February and that means it’s officially tax season. If you are going to tackle filing your tax return yourself this year—and every Canadian should try to grasp this life skill at least once—you will want to know more about the basic elements of the T1 General Income Tax and Benefit Return.

This includes choosing the right package of forms and schedules for your province of residence as of December 31, 2015. A tax return can be filed on paper, or using approved tax filing software and Canada Revenue Agency’s (CRA’s) NETFILE on the internet. If you decide to take your tax filing affairs to an income tax specialist, that professional will use a process called EFILE.

Regardless how you choose to file, there are five basic elements on the federal T1 General tax return you’ll need to be familiar with:

• Page 1: Taxpayer Identification
• Page 2: Total Income (Line 150)
• Page 3: Net Income (Line 236) and Taxable Income (Line 260)
• Schedule 1: Calculation of Federal Taxes Payable (line 420) and Non-Refundable Tax Credits (Line 350)
• Page 4: Calculation of Premiums payable for CPP (Line 421) and EI (Line 430), Social Benefits Repayments (Line 422), Provincial Taxes Payable (line 428) as well as Refund (Line 484) or Balance Due (Line 485) Details

For beginners, it’s a good idea to print out the first four pages of the federal tax return and Schedule 1, to become familiar with these five elements. They are the anchor points from which other schedules and forms stem and return to.

There are 11 federal schedules, numerous auxiliary tax forms and worksheets and, of course, a separate provincial tax return in Quebec. For all other provinces, a separate package of provincial tax forms is used to calculate non-refundable tax credits leading up to provincial taxes payable on Line 428 of the federal return, and the lucrative provincial refundable tax credits, which show up on Line 479 of the federal return to reduce your payables. 

You will need to report “world income” in Canadian funds, so now is a good time to gather all information about the income you earned in Canada and abroad as a starting point. Check all your bank accounts for deposits from abroad and check out your requirements to file Form T1135 Foreign Income Verification Statement. This form must be filed by April 30, whether you file a tax return or not.

Proprietorships can file the T1 General by June 15 to avoid late filing penalties, but should file by April 30 to avoid interest charges on taxes owed. Everyone else must file by April 30 if they have a balance due.

It’s also a good idea to sign up for My Account on the Canada Revenue Agency’s website, so that you can log in and get important information about which copies of T-Slips CRA has received from your employers and financial institutions. This site will not necessarily show all the slips or amended slips when you are filing your return, but will give you a good idea of what slips you might be missing. Also check out the “Auto-Fill my Return” feature, which is new this year. It downloads certain information from CRA into qualifying software, so you can avoid keying in the data from the slips CRA has in its possession for you.

If it all seems a bit overwhelming, call a Tax Services Specialist to assist with documentation and setting up your online solutions. Remember, filing a tax return is about what you keep. Make sure you file to your family’s very best advantage, reporting all income to avoid penalties, but digging for every deduction and credit you are entitled to.

Evelyn Jacks is a best-selling Canadian author of 52 books including her latest, Family Tax Essentials, which will be published next month. Evelyn is the Founder and President of Knowledge Bureau, a national educational institute. To learn more about professional tax preparation and tax-efficient wealth management, see www.knowledgebureau.com.

Additional Educational Resources include Family Tax Essentials by Evelyn Jacks and DFA - Tax Services Specialist^TM program.

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