Koroll & Company Blog

Every year, taxpayers file a tax return to calculate their tax payable and report their income to the government. This return will include an Income Tax and Benefit Return along with other forms and schedules to help itemize income and expenses and calculate credits. 

Income Tax And Benefit Return 

The Income Tax and Benefit Return consists of 7 steps. 

Step 1 – Identification 

In this section you will provide information about yourself including your:

• Name 
• SIN (Social Insurance Number) 
• Birthdate 
• Marital Status 
• Address
• Email (if you want to register for online mail) 
• Spouse or common-law partners first name, SIN and net income

You’ll also have to let the CRA know whether you are a citizen and if you want them to share your info with Elections Canada to update your voter registration. And whether any of your income is exempt under the Indian Act. 

Lastly, you’ll have to let the CRA know whether you own or hold specified foreign property worth $100,000 CDN or more. This includes but isn’t limited to: 

• Funds 
• Intangible property such as copyrights 
• Tangible property (could be any property including real property (land/bldg.))
• Shares
• Interest in a foreign trust 
• Interest in a partnership with specified foreign property 
• Interest in a foreign insurance policy 

Step 2 – Total Income 

This section includes income from all sources (inside and out of Canada for Canadian residents) that you’re required to report on your income tax return. In most instances you will need to report the gross income, but there are some exceptions where net income will have to be reported as well as or instead of gross income. This will be specified on your tax return. 

Step 3 – Net Income 

Net income is your total income less allowable deductions. This includes, but is not limited to, deductions for: 

• RRSP contributions
• Union dues and professional fees 
• Moving expenses 
• Childcare expenses 
• Support payments made 
• Carrying charges and interest expenses

Net income is important as it’s used to determine your eligibility for different benefits and credits. 

Step 4 – Taxable Income 

Taxable income is the income that you’ll have to pay taxes on. There are certain deductions that are applied to net income to get to the taxable income. This includes: 

• Exempt foreign income 
• Security option deductions 
• Capital gains deduction 

Step 5 – Federal Tax 

Step 5 is separated into 3 parts. 

Part A – Federal Non-Refundable Tax Credits 

In this section you will calculate your total non-refundable tax credits which will reduce your tax owing before applying refundable tax credits. 

Part B – Federal Tax On Taxable Income 

In this section you will calculate the amount of tax you owe on your taxable income. 2021 tax brackets are as follows: 

Part C – Net Federal Tax 

In part C you will reduce your federal tax from Part B by the non-refundable credits in Part A and other specified credits. This will give you your net federal tax. 

Step 6 – Provincial Or Territorial Tax

Except for Quebec, Step 6 isn’t included in the Federal Tax Return. Instead, you’ll have to complete Form 428 to calculate your provincial and territorial tax. This amount is then transferred to Step 7. 

Step 7 – Refund Or Balance Owing

On the final page of your Income Tax and Benefit Return you will add your provincial and federal taxes as well as other amounts payable, such as social assistance benefit repayments. Then you’ll deduct tax paid and refundable tax credits to determine whether you owe taxes or will be receiving a refund. 

Schedule 2

This schedule is used to claim a transfer from your spouse or common law partner. Transfers from your spouse allow you to share non-refundable credit, including: 

• Age amount 
• Amount for children 18 or older
• Pension income amount 
• Disability amount 
• Tuition amounts 

If your spouse is not filing a return, then use the amount they would have used on their return. 

Schedule 3

Schedule 3 is used to report the disposition of capital property to report capital gains or losses. It is divided into 8 sections:

1. Qualified small business corporation shares 
2. Qualified farm and fishing property 
3. Publicly traded shares, mutual fund units, deferral or eligible small business corporation shares, and other shares 
4. Real estate, depreciable property, and other properties 
5. Bonds, debentures, promissory notes, and other similar properties 
6. Other mortgage foreclosures and conditional sales repossessions 
7. Personal use property (PUP) 
8. Listed personal property (LPP) 

Schedule 3 is also used to designate your principal residence if you are claiming the principal residence exemption to eliminate capital gains (and the applicable taxes). 

Schedule 5 

This schedule is used to claim amounts for spouse or common-law partner and dependents. You’ll also use this schedule to calculate the Canada caregiver amount for spouse or common-law partner and dependents, when applicable. 

Schedule 6

Schedule 6 will help you determine whether you are eligible to receive the Working Income Tax Benefit, a supplement for low-income working Canadians. If you’re eligible it will help you calculate how much you can claim. 

Schedule 7 

Schedule 7 is used to keep track of RRSP contributions and transfers to your RRSP. This includes unused contributions. It will also help keep track of activities related to the Home Buyers’ Plan (HBP) and Lifelong Learning Plan (LLP), such as designating contributions as repayments. 

Schedule 8

This schedule is used to calculate CPP contributions and overpayments. Once completed, amounts are transferred to your Income Tax and Benefit Return to help calculate your tax owing. 

This schedule is also used to:

• Elect stop contributing to CPP if you were between 65 and 70, or reverse this election if made previously
• Help determine your contributions if you’re electing to pay them as a self-employed individual
• Determine additional contributions for other income, such as tips, it you want to elect to pay CPP on these amounts 

Schedule 9

Schedule 9 is used to calculate your tax credit for donations and gifts. The calculation must be done separately from other non-refundable tax credits because the credit rate increases the more you donate. 

Schedule 11

This schedule helps students calculate and keep track of their tuition amounts. It’s used to calculate transfers to spouses, parents or grandparents, as well as any unused amounts that can be carried forward to future tax years. 

Schedule 13

This schedule is used to calculate Employment Insurance (EI) premiums on self-employment income and other eligible amounts. 

As a self-employed individual you are not required to pay into the EI program, however, that also means you can’t take advantage of the special benefits. If you wish to participate you can enter into an agreement through Service Canada. 

There are many other forms that may be needed when filing your tax return. Form more information on the Income Tax and Benefit Return, any of the schedules, or additional forms, please contact our team today.