Start Your Personal Tax (T1) Preparation Business
Introduction to the Canadian Tax System
Topics to be covered in this presentation
Canadian Tax System
Tax Rates
Basic Credits
Filing Dates
New Immigrant
First-time filing
Sources of Income
Employment Income
Commission Income
Property Income
Self-Employed Income
Partnership Income
Rental Income
RRSP, TFSA, RESP
Ways to Save Tax
CRA Review, Penalties
Tax Planning
Non-Residence Tax
Questions and Feedback
Introduction to Canadian tax system
Determine if the person is liable for Canadian tax
Residency concept
Calculate income, including world income
Much of the income is calculated on a source concept
After calculating income, compute taxable income, i.e. Net of various deductions
After taxable income is computed, you can then calculate tax payable
Basic and Other credits
Canada Pension Plan
Social security arrangement contributions
Employment insurance premiums;
Disability amount
Interest paid on loans for post-secondary education
Donations and gifts
Canada employment amount
Home buyers’ amount
Adoption expenses
Pension income amount
Medical expenses
Filing due date
Generally, your income tax return has to be filed on or before: April 30 of the year after the tax year; or
If you, your spouse, or common-law partner carried on a business in Canada, the return must be filed on or before June 15 of the year after the tax year.
Note: A balance of tax owing must be paid on or before April 30 of the year after the tax year, regardless of the due date of the tax return.
New Immigrant
¨World income
¨Entitled to the GST credit after you arrive
¨Tax treaties
¨Moving expenses to Canada (Not deductible)
¨Pro Rated the Personal amounts and dependant claims
¨Child Tax Benefits shortly after they arrive
¨Determine the Fair Market Value (FMV) of the owned capital property on the day you established residence.
¨
First time Filing
Report your income
Become 19
Keep your receipts
Understand what you are claiming
Tax planning
Tax Free Savings Account
Sources of Income
Employment income
Property income
Business income
Other income
Employment income
Salary | Wages | Bonus | Employee stock options | Tips
Claim educational & professional training expenses if you paid them yourself.
Claim Job-related travel expenses not paid by the employer.
Claim unreimbursed employee expenses, i.e., professional membership fees, license fees, etc.
Commission income
Claim expenses to earn commission
Commission expense can not be more than your commission income
A specific form has to be authorized by your employer to claim commission expenses
Property Income
Interest income: Include in your ordinary income. Example: Income from GIC, savings account, etc.
Dividend income: Initially dividend is grossed up and included in your income, and then you get a dividend tax credit. The calculation depends on the eligibility and non-eligibility of that dividend.
Capital Gain: Only 50% of the gain is included in your income.
Self-Employed
Business number | HST Number
Form T2125
Keep Receipts
Claim expenses as long as they are reasonable and incurred to earn income.
Common expenses: Office supplies, consulting fees, Travel, Insurance, equipment rental, bank charges, repairs and maintenance, Meals and gifts.
Home office expenses: Rent, Mortgage interest, Property taxes, Insurance, Utilities, Telephone, Minor repairs and maintenance.
Vehicle Expenses: Gas, repairs, lease, insurance, driver's license, interest on car loans, parking, washes, and some percentage of the cost of the vehicle used.
Partnership Income
Partnership agreement
T0513, Effective from Jan 1, 2011
Include in your business income
Take professional advice
Rental Income
Calculation of total rented area
Consider splitting the income with your spouse
Expense to claim
Advertising
Property insurance
Mortgage interest, not principal
Maintenance and repairs
Property taxes
Utilities
Other expense
Do not claim CCA, otherwise you have to pay CG tax when sold
Principal residence, no CG tax, subject to life time exemption limit
Claim all expenses incurred to earn rental income.
RRSP Contribution
Beat the deadline (March 1, 2026)
Know your limit
Over the limit rules
Spousal support
Age restrictions
RRSP Withdrawal
Withdrawal is considered income
Lose your tax shelter
Contribution room lost
Withdrawals without penalties
First-time home buyer
Life-long learning
RRSP vs. TFSA
Tax treatment
Withdrawal options
Financial planning
TFSA is cumulative
RESP
Planning for your child's education
Amounts paid as Contributions are not deductible by a Subscriber for income tax purposes
No tax is payable by a Subscriber on Income earned for a taxation year throughout which the particular Plan was registered as an RESP.
Also, the income earned is not included in income when returned to Subscribers or Beneficiaries.
Ways to Save Tax
RRSP contribution by March 1
Interest paid on investment loans
Donation tax credit
Income splitting
Buying tax-efficient investments
Invest in TFSA
CRA Review
Forget a T slip
Claiming credits incorrectly
Out of the ordinary
Living large on a little income
Compliance history
How to deal with CRA audit
Deal with it
Meet the deadlines
Find your paperwork
Make sure you are eligible
Pay up front
The CRA is not always right
Interest and penalties
The penalty is 5% of your 2025 balance owing, plus 1% of your balance owing for each full month our return is late, to a maximum of 12 months.
Tax Planning/ Evasion/Avoidance
Planning
Reduce tax by following income tax act
Shifting income from one period to the next period
Converting the nature of income from one type to another
Evasion
Wilful commission or knowing omission
Making false or deceptive statements
Avoidance
Lawful minimization of tax payment
Considered abusive
Non-residence tax
Part XIII tax
Receiving income from within Canada on items such as interest, rents, dividends
Subject to withholding tax
May be reduced by a tax convention between countries
Miscellaneous
You can still file past returns even if you have no income and are eligible to certain benefits.
Not filing your taxes on time may discontinue your Child Tax Benefit and GST Benefit.
Keep all receipts and records for up to 7 years in case you are being audited by CRA.
If you or your spouse is self-employed, your tax filing date is June 15th. However, you need to pay your tax bill by April 30th to avoid penalties.
If you are in error, the CRA will charge interest on the additional amount from the deadline date.