MEL4E
Unit 2: Budgets and Taxes
Activity 2: Filing Taxes, Filling Forms
Have you ever wondered how the Government of Canada spends the money it collects as taxes? The following graphic shows Federal spending in 2013/14. Compare to 2016/17 spending? See if you can find more recent statistics.
Extracting meaning from the graphic
The figure shows that the Canadian government spent 6 cents of every dollar on Employment Insurance benefits. It also shows that this represents 17.3 billion dollars.
Think for a minute...
Why is it better to use the notation: 17.3 billion, rather than the notation: 17,300,000,000?
Questions
The Canadian Government spent $17.3 billion on Employment Insurance Benefits, which is 6 cents out of the total 100 cents. Use this information and proportional reasoning to determine the total dollar amount that the Canadian government collected in taxes that year.
Answer
Reasoning:
6 cents of every dollar of total tax revenue is the same as
6 cents of 100 cents of total tax revenue, which is the same as
6/100 of total tax revenue, which is the same as
6% of total tax revenue, which is the same as
0.06 of total tax revenue.
So,
0.06 of total tax revenue = 17.3 billion dollars,
So total tax revenue = 17.3 billion/0.06
The correct answer is therefore $288.3 billion.
How could you have used the information in the graphic to figure out the total tax revenue?
Answer
You could add up the dollar figures in the graphic. When you do this you get the total of $272.7 billion, but this is not the same as $288.3 billion.
Look at the graphic again. There is more information there. What is there about that particular choice of graph that you could use to predict what total you will get if you add up the total number of cents spent in each section?
Answer
You should get 100 cents (or 1 dollar) because it is a pie graph, and the pieces of a pie graph always add up to 100%.
Discussion: Why Seniors?
The single largest portion of spending of tax revenue falls into the "Support to Elderly" category.
Fifteen cents of every dollar of tax revenue (or 15%) is spent on such things as The Old Age Security payments (OAS), the Guaranteed Income Supplement, and Allowance for Spouses. This represents money paid directly to seniors to supplement their income.
What does this spending suggest about the values and beliefs of the population of Canada?
Why do you think so much tax money is spent on seniors? Try to come up with at least three reasons.
A brief description of some of the taxes that Canadians pay is available here:
Starting a New Job - First Steps Towards Income Taxes
Social Insurance Numbers
If you have ever started a new job, you will know that one of the first things you have to do is give your Social Insurance Number (SIN) to your employer. Why is that?
Your SIN is a very important number because it is the number that gives you access to government programs and benefits, and it is the number that the CRA uses to identify your files.
Did You Know?
Did you know that:
- The Canada Revenue Agency (CRA) keeps taxpayer records by SIN?
- Your eligibility for benefits are linked to your SIN?
- Sometimes the amount of your benefits is linked to the amount of tax you have paid to the CRA?
- Employers are required to report to the CRA the amount of money you have been paid and the amount of tax deducted from your paycheque?
Tax Credits
The next thing you have to do when you start a new job is to fill out "Form TD1, Personal Tax Credits Return".
A tax credit is an amount that is deducted from the amount of income tax you owe. It is just like having a credit for a store - it reduces the amount you have to pay. You subtract it from the amount you owe to determine the amount you still have to pay.
The TD1 form consists of two pages. You can see the pages below as images, or you can open a TD1 form here as well.
Your employer uses the information from your TD1 form to determine how much income tax they have to deduct from each of your paycheques.
Your Pay Stub
Your employer is required to give you information about your earnings, as well as any amounts deducted from your pay. Usually, this comes in the form of a pay stub. This is one example of what a pay stub may look like.
The pay stub shows how much money you were paid by your employer for the current pay period. It also shows the amount that has been deducted from your pay.
Your employer calculates the amount that needs to be deducted from your pay for Canada Pension Plan contributions, Employment Insurance, and income tax. The deductions are based on the amount of your pay, as well as the information you provided on your TD1 form.
These amounts are tracked by your employer and a summary is sent to you. The T4 slip, which you will learn more about soon, is the form the employer uses to summarize this information. It is sent to you after the end of the year, in time for you to use it to complete your income taxes.
Getting Ready for Income Tax Filing Time
To have a smooth tax filing, you need to have all your information ready. The most important document you need is your T4 slip. If you have income from more than one source, you should have more than one T4 slip.
When you owe income tax, the deadline for filing your income tax return is April 30. The income tax return is the set of forms you use to report your income taxes with the CRA. It includes information about your earnings and taxes paid during the year.
Did You Know?
Isn't it strange that the tax deadline is April 30 the year ends on December 31?
The reason for this is that businesses have to gather up the information that summarizes the amounts paid to each employee over the year, as well the amounts deducted from their pay, and send it out to every employee.
They also file this information with the CRA. This gives businesses time to gather the information, print out tax forms, send them out to individual employees, and still leave time for individuals to complete their tax forms.
The T4 Slip
The T4 slip is the form used by employers to summarize an employee’s earnings and deductions for the previous tax year. It provides the employee with important information they will need to file their personal income tax returns.
Notice that each box is numbered. The number in the box corresponds to line numbers in the Income Tax return form.
If there is no information in a particular box, it means that there is nothing to report.
If you have income from institutions other than the company you work for, such as from an investment with a financial institution, then you will be sent other forms from those institutions summarizing that income.
Taxing of Income
The amount of income tax you pay, both federal and provincial, is based on how much money you earn. However, you generally do not pay tax on every dollar you earn. The amount of tax you have to pay is based on your taxable income.
The following interactive will allow you to see the steps involved in determining that amount of taxes owed to the government:
Completing a tax return: The T1 General Tax Form
Take a few minutes to look over the T1 General Tax Form. Find the sections that correspond to the steps above and read through them to get an idea of what type of information needs to be included.
The images below show the four pages of the form, but you can also open up the form itself.
Questions
To determine your TOTAL INCOME, you complete lines _______ to ________.
Answer
Lines 101 to 150.
To determine your NET INCOME, you complete lines _______ to ________.
Answer
Lines 150 to 236
To determine your TAXABLE INCOME, you complete lines _______ to ________.
Answer
Lines 244 to 260
At this point in the process, to find your tax rates, calculate your tax credits, and determine the tax owing, you have to leave the T1 General Tax Form for a while and complete:
- Schedule 1 - Federal Tax. (Form number T1-2015 for the tax year 2015) and
- Ontario Tax Form ON428.
The information from these will allow you to finish the T1 General Tax Form.
You will be using the forms in the upcoming activities.
The Federal Tax form used in this lesson is the 2015. Tax forms sometimes have small changes from year to year. To see the most recent tax form, go to the Canada Revenue Agency site.
In Canada, we pay many different types of taxes, and tax money is collected by all three levels of government: the federal government (Canada), the provincial government (Ontario), and municipality where we live (local). The government spends the money it receives in taxes (tax revenue) to provide the people of Canada with the programs and services we use every day, such as:
- Maintaining and building roads and highways;
- Providing health-care benefits and maintain hospitals;
- Building, operating, and maintaining public schools;
- Providing a “social safety net” for those who need extra assistance.
Introduction
Learning Goals and Success Criteria
Learning Skills and Work Habits
Rubric 1