Frequently Asked Questions About Personal Tax
The process of filing personal tax returns isn’t an easy task. While trying to keep the right documentation ready, clients often have a ton of questions about personal tax but find answers to these questions difficult to come by. To ensure you have all your doubts cleared and are armed with the most accurate information available, Prospera Chartered Accountants has answered some of the most frequently asked questions about personal tax.
1. What are the most beneficial tax deductions?
Registered Retirement Savings Plan (RRSP) is the most used tax deduction, mainly when your income is high. This is over $93,000 when tax rates jump to 36%. If your income is low, it is probably best to use TFSA as saving.
2. What are tax credits?
Tax credits are more common than tax deductions and include various expenses. It can be calculated by applying a low rate (25%) tax credit against your tax owing. The most common credits are CPP, EI, medical and tuition for university.
3. Can I deduct expenses I incur while I work?
Some expenses can be deducted, but the employer must first provide you with form T2200 which shows you the kind of expenses that you can deduct. Most common expenses are from the vehicle and cell phone. A home office can only be used if an employer does not provide an office.
4. What can I use as a medical expense?
Medical expenses include drug, dental and optical costs but these are not reimbursed in the health plan fees and travel insurance costs. Also, some or all of the fees paid are for long-term care. There is a long list of eligible expenses so be sure to check with us if you are unsure.
5. Do I have to pay installments?
If your tax owing at the time of filing is over $3,000, then the CRA may ask you to make installments. You should make them if you expect to owe at least that amount when you file your current taxes. If you expect to pay less, you can reduce or ignore the installment request. If you do not pay in spite of owing, you will be charged interest.
6. What happens if I cannot find a tax slip?
We now have access to your tax slips on the CRA website and may be able to get them. The website is not 100% accurate, so we ask for copies of your slips to compare with the website.
7. Can I deduct the fees I pay my broker to manage my portfolio?
You can deduct these except for fees related to RRSP and TFSA accounts. You can also deduct interest paid on any loans used to buy investments.
8. How do I know how much I can contribute to my RRSP?
Our tax letter from last year outlines the amounts, as well as the notice of assessment from CRA or you can check ‘My Account’ on the CRA website. Alternatively, you can call us to confirm the amount.
If you have any more questions about personal tax or any tax-related issues, get in touch with the experts at Prospera Chartered Accountants. As a CPA firm in Calgary, Alberta, we provide full-service to our small to mid-sized entrepreneurial clients and our high net worth personal tax clients and enjoy working with clients from start-up to retirement. With over twenty-five years of experience, we are committed to putting our clients’ needs first and provide the highest quality service based on a foundation of high ethics.