If you’re thinking of filing your Canadian T1 income tax return or even for other countries, I have a few tips for you that might be of a little help in preparing your tax return.
There are so many ways to file your TI Individual Income Tax & Benefit Return. You can either hire an accountant, a tax preparer, or you can prepare it yourself. If you decide to file it yourself, you can file your individual tax return through online using CRA approved tax software for EFILE/NETFILE, or file by phone through TELEFILE, or in paper form and send/drop it to any closed by Canada Revenue Agency (CRA) office.
Usually, when there are only a few of T1 Individual Income Tax and Benefit Return forms to prepare, I do them in paper form, instead of using tax software. While it is true that preparing a tax return in paper form can be time-consuming, and likely computational mistakes are common, but there are ways to eliminate these mistakes.
For almost a couple decades that I have been preparing income tax returns, I finally found a way of eliminating the time-consuming part and the computational mistakes through supplementing it with a spreadsheet software, using Excel program. In the past, I had created an Excel tax template file, just designed for preparing T Individual Income Tax and Benefit Return. Each year, I update this file for new changes either they are new tax laws, increase amount of deductions, credits or new income tax rates, both for federally or provincially.
Besides supplementing my paper form T1 Individual income tax preparation with a spreadsheet program tax template file, the following items are quite useful in preparing it:
(i) Forms Needed
Make sure that you have the proper forms that you wish to file (i.e. T1-General & schedules). You can download forms, publications, and other helpful information through the Canada Revenue Agency website: Canada Revenue Agency (CRA) or just drop by at any Canada Postal office during tax season. Usually they start having these paper tax returns from January to April.
(ii) References
Make sure that you have access to CRA General Income Tax and Benefit Guide for reference.
(iii) Supplement with Spreadsheet Tax Template File
If you can make an Excel file to supplement your T1 paper return preparation, the better. If not, please let me know, so I can send you a copy of my Excel file.
(iv) Collection of Source Documents
Collect all your T-slips, pay stubs, receipts, forms related tax files, documents and information. Make an envelope for each account, label each one of them
(v) How to Begin the Calculation Process
Start with the reporting of your Total Income for the year, then the Net Income, then the Taxable Income, Calculation of available Non-refundable Credits, then the Total Payable and then the Total Credits and end with the Balance or Refund Amount.
(vi) Total Income Calculation (Line 101-150)
Collect all your source of income information. File them accordingly as they are listed in the T1-General Form. You might have to prepare a schedule related to business, professional, commission, farming & fishing income. Also, you might have to prepare a schedule for interest income, partnership income (i.e. only for non-active partner or considered as passive income). Please note, that income from an active partner or non-passive income is reported in a schedule that is also the same for a sole proprietorship. In addition to the mentioned source of income, an income from rental, capital gain or other type of income have to be included, and likely, require a completion of schedules as well.
(vii) Calculation of the Net Income (Line 150 - 236)
Basically these are deductions that you can deduct dollar for dollar to arrive into Net Income. Collect all your T-slips, receipts, schedules, forms, documents and related information that apply to this section.
(viii) Calculation of the Taxable Income (Line 236 - 260)
The items included in this section are also a dollar for dollar deduction. The most common ones are the amounts you reported from Line 144, 145 & 146 to arrive into the total amount in Line 147. This Line 147 you reported in Line 147, as income, becomes a deduction in Line 250 to arrive into your Taxable Income.
(ix) Calculation of Federal and Provincial or Territorial Taxes
Before you can calculate your Taxes Payable, you have to complete two schedules. First schedule is the Schedule 1 – Federal Tax, which includes 3-steps. These steps are the calculation of: Step-1, the calculation of your Federal Non-refundable Tax Credits; Step-2, Federal Tax on Taxable Income and Step-3, Net Federal Tax. The second schedule you have to complete is a schedule to use in calculation of your Provincial or Territorial Tax. For example, for taxpayers that live in British Columbia, they use a schedule called, BC428 – British Columbia Tax. This second schedule is very similar to Schedule 1. It includes 3-steps in calculating the Provincial or Territorial tax. Basically, these two schedules are use for calculating Net Federal and Net Provincial or Territorial Taxes, based from allowable, non-refundable credits and other type of credits.
(x) Calculation of the Total Payable (Line 420 - 435)
Once you have calculated the Net Federal Tax and Provincial or Territorial amounts, then you can calculate the Total Payable amount.
(xi) Calculation of Total Credits (Line 437-482 & Line 435-482 (Balance Owing/Refund)
The last section to calculate is the Total Credits, to arrive into your total Balance Owing or Refund Amount. The most common credits are the total income tax deducted, and income taxes paid by installments related to the tax year.
(xii) Completion of Your T1-General
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| My tax helpers! |
There are so many ways to file your TI Individual Income Tax & Benefit Return. You can either hire an accountant, a tax preparer, or you can prepare it yourself. If you decide to file it yourself, you can file your individual tax return through online using CRA approved tax software for EFILE/NETFILE, or file by phone through TELEFILE, or in paper form and send/drop it to any closed by Canada Revenue Agency (CRA) office.
Usually, when there are only a few of T1 Individual Income Tax and Benefit Return forms to prepare, I do them in paper form, instead of using tax software. While it is true that preparing a tax return in paper form can be time-consuming, and likely computational mistakes are common, but there are ways to eliminate these mistakes.
For almost a couple decades that I have been preparing income tax returns, I finally found a way of eliminating the time-consuming part and the computational mistakes through supplementing it with a spreadsheet software, using Excel program. In the past, I had created an Excel tax template file, just designed for preparing T Individual Income Tax and Benefit Return. Each year, I update this file for new changes either they are new tax laws, increase amount of deductions, credits or new income tax rates, both for federally or provincially.
 |
| Picture courtesy of Brain Hostings |
(i) Forms Needed
Make sure that you have the proper forms that you wish to file (i.e. T1-General & schedules). You can download forms, publications, and other helpful information through the Canada Revenue Agency website: Canada Revenue Agency (CRA) or just drop by at any Canada Postal office during tax season. Usually they start having these paper tax returns from January to April.
(ii) References
Make sure that you have access to CRA General Income Tax and Benefit Guide for reference.
(iii) Supplement with Spreadsheet Tax Template File
If you can make an Excel file to supplement your T1 paper return preparation, the better. If not, please let me know, so I can send you a copy of my Excel file.
(iv) Collection of Source Documents
Collect all your T-slips, pay stubs, receipts, forms related tax files, documents and information. Make an envelope for each account, label each one of them
(v) How to Begin the Calculation Process
Start with the reporting of your Total Income for the year, then the Net Income, then the Taxable Income, Calculation of available Non-refundable Credits, then the Total Payable and then the Total Credits and end with the Balance or Refund Amount.
 |
| Picture courtesy of Brain Hostings |
Collect all your source of income information. File them accordingly as they are listed in the T1-General Form. You might have to prepare a schedule related to business, professional, commission, farming & fishing income. Also, you might have to prepare a schedule for interest income, partnership income (i.e. only for non-active partner or considered as passive income). Please note, that income from an active partner or non-passive income is reported in a schedule that is also the same for a sole proprietorship. In addition to the mentioned source of income, an income from rental, capital gain or other type of income have to be included, and likely, require a completion of schedules as well.
(vii) Calculation of the Net Income (Line 150 - 236)
Basically these are deductions that you can deduct dollar for dollar to arrive into Net Income. Collect all your T-slips, receipts, schedules, forms, documents and related information that apply to this section.
(viii) Calculation of the Taxable Income (Line 236 - 260)
The items included in this section are also a dollar for dollar deduction. The most common ones are the amounts you reported from Line 144, 145 & 146 to arrive into the total amount in Line 147. This Line 147 you reported in Line 147, as income, becomes a deduction in Line 250 to arrive into your Taxable Income.
 |
| Picture courtesy of Brain Hostings |
Before you can calculate your Taxes Payable, you have to complete two schedules. First schedule is the Schedule 1 – Federal Tax, which includes 3-steps. These steps are the calculation of: Step-1, the calculation of your Federal Non-refundable Tax Credits; Step-2, Federal Tax on Taxable Income and Step-3, Net Federal Tax. The second schedule you have to complete is a schedule to use in calculation of your Provincial or Territorial Tax. For example, for taxpayers that live in British Columbia, they use a schedule called, BC428 – British Columbia Tax. This second schedule is very similar to Schedule 1. It includes 3-steps in calculating the Provincial or Territorial tax. Basically, these two schedules are use for calculating Net Federal and Net Provincial or Territorial Taxes, based from allowable, non-refundable credits and other type of credits.
(x) Calculation of the Total Payable (Line 420 - 435)
Once you have calculated the Net Federal Tax and Provincial or Territorial amounts, then you can calculate the Total Payable amount.
(xi) Calculation of Total Credits (Line 437-482 & Line 435-482 (Balance Owing/Refund)
The last section to calculate is the Total Credits, to arrive into your total Balance Owing or Refund Amount. The most common credits are the total income tax deducted, and income taxes paid by installments related to the tax year.
(xii) Completion of Your T1-General
Before you send your completed T1-General, make sure that you have signed and dated the form. If you wish that you require your refund to be deposited to your bank account, then fill-in the required information and necessary documents. Lastly, before you seal the envelope, make sure that all the necessary schedules, T-slips, receipts, forms, receipts and documents you need to include with your T-1 General Income Tax and Benefit form are attached in the middle of the 4 pages of this form.
(xiii) Missing information after sending T1 tax form to CRA
After sending your T1 tax return, and you suddenly remembered that you missed to include information that should have been included in your recently filed T1, don’t worry. Just download a T1-ADJ, T1 Adjustment Request Form from CRA website or request it to be sent by mail, or you can send a signed letter to CRA with details of the taxation year that needs adjustment, with your Social Insurance Number (SIN), address, phone, and details of the changes, and attached required statements or schedules, as supporting documents. You do not have to prepare another T1tax return, just send the Adjustment form, or your signed letter and CRA will adjust it for you accordingly.
 |
| Picture courtesy of Brain Hostings |
After sending your T1 tax return, and you suddenly remembered that you missed to include information that should have been included in your recently filed T1, don’t worry. Just download a T1-ADJ, T1 Adjustment Request Form from CRA website or request it to be sent by mail, or you can send a signed letter to CRA with details of the taxation year that needs adjustment, with your Social Insurance Number (SIN), address, phone, and details of the changes, and attached required statements or schedules, as supporting documents. You do not have to prepare another T1tax return, just send the Adjustment form, or your signed letter and CRA will adjust it for you accordingly.
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Please feel free to leave comments/inquiries, or you may contact me at:
Earla Riopel, BSCom(USA), DipAcc(UBC)
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