Tax tips for Canadian IT consultants

Understanding Tax Credits and Deductions for a Single IT Consultant in Canada

Answered

Background Information

Anna Smith is a 30 year old single lady and a college graduate from George Brown College. She live in Toronto Canada and works as an IT consultant in a company. She also works as a personal consultant for herself. In this case, she will be given a different tax credit as she will not have child tax credits. For her to qualify for the child tax credit, her children which she does not currently have must meet the following criteria and requirements sent by the Canadian Tax Authority. The requirements includes the fact that any child must be under the age of 17 by the last date of filing the taxes given. Student loans, charitable donations are taxed differently under the Canadian Tax System.

However, as`

Employer	Gross Wages	Federal Income Tax Withholding	Income Tax Withholding
Long View Systems	$48,000	$7,200	$5,000
Additional Income from consulting	$13,225	$300	$120

Income	Amount ($)	Amount ($)
Wages, salaries, tips, other compensation etc, attach w2	Long View IT systems	48,000 2,450
Federal income tax refund		325
Taxes and interest attach W2	Interest income T47 –CIBC Banking Division $ 310	247 2500 1300
Tax Exempt Interest	N/A
Ordinary dividends attach Schedule 2	N/A
Qualified Dividends	Qualified Dividends-General Electric 4,200
Taxable refunds , credits or offsets of state or local income tax	325
Alimony Received	N/A
Business income or loss attach C2	N/a
Capital gain or loss, attach D schedule if required	N/a
Other gains or losses	1200
IRA distribution
Pensions and Annuities
Rental , real estate , Partnership	N/a
Farm income
Unemployment compensation in excess of $ 2,400	n/a
Social security benefits	720
Other incomes
Total Adjusted net income		39,159
ADJUSTED GROSS INCOME
Educator expenses
Health savings account	Dentist (unreimbursed by insurance) $1,500 Doctors (unreimbursed by insurance) $ 475
Moving expenses – Church contributions	5,400
Certain incomes such as performing artists	N/A
One half of self –employment tax	N/A
Self-employment health deductions	N/a
Penalty on withdrawal of savings	Na/ a
Alimony paid (SSN)	N/A
IRA Deductions –and Real estate taxes	1,240
Student loan deductions interest
Tuition and fees deductions	N/A
Domestic production activities deductions	N/A
Mortgage interest	7,845	7,845
Individual Taxable Income		38,458

Q1-Bonus T2125

Details

Long View Systems	$48,000	$7,200	$5,000
Additional Income from consulting	$13,225	$300	$120

Income

Amount ($)

Wages, salaries, tips, other compensation etc, attach w2

Long View IT systems

48,000

2,450

Federal income tax refund

325

Q2- T2125

Subtotal of business expenses at home

Details	$	$
Internet expenses	49.94
Mobility	61
		$ 110.95

*BONUS

T2125 - part 7 - line 7I

personal portion of the business-use-of-home expenses

Details	$	$
Internet expenses	49.94
Mobility	61
		$ 110.95

*BONUS

T2125 - part 7 - line 7J

Business portion for home expenses made

Details	$	$
Internet expenses	49.94
Mobility	61
		$ 110.95*50%
	Business amount expense	$55.475

*BONUS

T2125 - Area A - table from left to right

Details	$	$
Cost of capital –computers	49.94
Mobility	61
		$ 110.95*50%
	Business amount expense	$55.475

T1 - step 2 - line 10

Interest Income

Details

Taxes and interest attach W2

Interest income T47 –CIBC Banking Division $ 310

247

T1 - step 2 - line 28

This is Anna's total income`

Employer	Gross Wages	Federal Income Tax Withholding	State Income Tax Withholding
Long View Systems	$48,000	$7,200	$5,000
Additional Income from consulting	$13,225	$300	$120

Income	Amount ($)	Amount ($)
Wages, salaries, tips, other compensation etc, attach w2	Long View IT systems	48,000 2,450
Federal income tax refund		325
Taxes and interest attach W2	Interest income T47 –CIBC Banking Division $ 310	247 2500 1300
Tax Exempt Interest	N/A
Ordinary dividends attach Schedule 2	N/A
Qualified Dividends	Qualified Dividends-General Electric 4,200
Taxable refunds , credits or offsets of state or local income tax	325
Alimony Received	N/A
Business income or loss attach C2	N/a
Capital gain or loss, attach D schedule if required	N/a
Other gains or losses	1200
IRA distribution
Pensions and Annuities
Rental , real estate , Partnership	N/a
Farm income
Unemployment compensation in excess of $ 2,400	n/a
Social security benefits	720
Other incomes
Total Adjusted net income		39,159
ADJUSTED GROSS INCOME
Educator expenses
Health savings account	Dentist (unreimbursed by insurance)
Moving expenses – Church contributions	5,400
Certain incomes such as performing artists	N/A
One half of self –employment tax	N/A
Self-employment health deductions	N/a
Penalty on withdrawal of savings	Na/ a
Alimony paid (SSN)	N/A
IRA Deductions –and Real estate taxes	1,240
Student loan deductions interest
Tuition and fees deductions	N/A
Domestic production activities deductions	N/A
Mortgage interest	7,845	7,845
Individual Taxable Income		38,458

T1 - step 3 - line 31

This is the allowable RRSP deduction Anna can claim, according to the Schedule 7 form

Details

Taxes and interest attach W2

RRSP

2200

S8 - Part 3 - line 8 OR 10

This is the amount of "enhanced CPP contributions" Anna may have paid. This will be counted as a deduction.

Details	$	$
Cost of capital –computers	49.94
Mobility	61
		$ 110.95*50%
	Business amount expense	$55.475

*BONUS

S8 - part 5 - line 34

The additional amount of CPP contributions Anna owes on her self-employment income

Employer	Gross Wages	Federal Income Tax Withholding	State Income Tax Withholding
Long View Systems	$48,000	$7,200	$5,000
Additional Income from consulting	$13,225	$300	$120

Income

Amount ($)

Wages, salaries, tips, other compensation etc, attach w2

Long View IT systems

48,000

2,450

*BONUS

S8 - part 5 - line 39

This is the employee portion of her self-employment CPP expense that Anna recieves as a tax credit

Employer	Gross Wages	Federal Income Tax Withholding	State Income Tax Withholding
Long View Systems	$48,000	$7,200	$5,000
Additional Income from consulting	$13,225	$300	$120

Income

Amount ($)

Wages, salaries, tips, other compensation etc, attach w2

Long View IT systems

48,000

2,450

Q14- T2125

Subtotal of business expenses at home

Details	$	$
Internet expenses	49.94
Mobility	61
		$ 110.95

*BONUS

T2125 - part 7 - line 7I

personal portion of the business-use-of-home expenses

Details	$	$
Internet expenses	49.94
Mobility	61
		$ 110.95

*BONUS

T2125 - part 7 - line 7J

Business portion for home expenses made

Details	$	$
Internet expenses	49.94
Mobility	61
		$ 110.95*50%
	Business amount expense	$55.475

*BONUS

T2125 - Area A - table from left to right

Details	$	$
Cost of capital –computers	49.94
Mobility	61
		$ 110.95*50%
	Business amount expense	$55.475

T1 - step 2 - line 10

Interest Income

Details

Taxes and interest attach W2

Interest income T47 –CIBC Banking Division $ 310

247

T1 - step 2 - line 28

This is Anna's total income`

Employer	Gross Wages	Federal Income Tax Withholding	State Income Tax Withholding
Long View Systems	$48,000	$7,200	$5,000
Additional Income from consulting	$13,225	$300	$120

Income	Amount ($)	Amount ($)
Wages, salaries, tips, other compensation etc, attach w2	Long View IT systems	48,000 2,450
Federal income tax refund		325
Taxes and interest attach W2	Interest income T47 –CIBC Banking Division $ 310	247 2500 1300
Tax Exempt Interest	N/A
Ordinary dividends attach Schedule 2	N/A
Qualified Dividends	Qualified Dividends-General Electric 4,200
Taxable refunds , credits or offsets of state or local income tax	325
Alimony Received	N/A
Business income or loss attach C2	N/a
Capital gain or loss, attach D schedule if required	N/a
Other gains or losses	1200
IRA distribution
Pensions and Annuities
Rental , real estate , Partnership	N/a
Farm income
Unemployment compensation in excess of $ 2,400	n/a
Social security benefits	720
Other incomes
Total Adjusted net income		39,159
ADJUSTED GROSS INCOME
Educator expenses
Health savings account	Dentist (unreimbursed by insurance) $1,500 Doctors (unreimbursed by insurance) $ 475
Moving expenses – Church contributions	5,400
Certain incomes such as performing artists	N/A
One half of self –employment tax	N/A
Self-employment health deductions	N/a
Penalty on withdrawal of savings	Na/ a
Alimony paid (SSN)	N/A
IRA Deductions –and Real estate taxes	1,240
Student loan deductions interest
Tuition and fees deductions	N/A
Domestic production activities deductions	N/A
Mortgage interest	7,845	7,845
Individual Taxable Income		38,458

T1 - step 3 - line 31

This is the allowable RRSP deduction Anna can claim, according to the Schedule 7 form

Details

Taxes and interest attach W2

RRSP

2200

S8 - Part 3 - line 8 OR 10

This is the amount of "enhanced CPP contributions" Anna may have paid. This will be counted as a deduction.

Details	$	$
Cost of capital –computers	49.94
Mobility	61
		$ 110.95*50%
	Business amount expense	$55.475

*BONUS

S8 - part 5 - line 34

The additional amount of CPP contributions Anna owes on her self-employment income

Employer	Gross Wages	Federal Income Tax Withholding	State Income Tax Withholding
Long View Systems	$48,000	$7,200	$5,000
Additional Income from consulting	$13,225	$300	$120

Income

Amount ($)

Wages, salaries, tips, other compensation etc, attach w2

Long View IT systems

48,000

2,450

*BONUS

S8 - part 5 - line 39

This is the employee portion of her self-employment CPP expense that Anna recieves as a tax credit

Employer	Gross Wages	Federal Income Tax Withholding	State Income Tax Withholding
Long View Systems	$48,000	$7,200	$5,000
Additional Income from consulting	$13,225	$300	$120

Income

Amount ($)

Wages, salaries, tips, other compensation etc, attach w2

Long View IT systems

48,000

2,450

*BONUS

S8 - part 5 - line 34

The additional amount of CPP contributions Anna owes on her self-employment income

Employer	Gross Wages	Federal Income Tax Withholding	State Income Tax Withholding
Long View Systems	$48,000	$7,200	$5,000
Additional Income from consulting	$13,225	$300	$120

Income

Amount ($)

Wages, salaries, tips, other compensation etc, attach w2

Long View IT systems

48,000

2,450

*BONUS

S8 - part 5 - line 39

This is the employee portion of her self-employment CPP expense that Anna recieves as a tax credit

Employer	Gross Wages	Federal Income Tax Withholding	State Income Tax Withholding
Long View Systems	$48,000	$7,200	$5,000
Additional Income from consulting	$13,225	$300	$120