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BCIT BUSA 2150 > Financial Planning Chapter 4 > Flashcards

Financial Planning Chapter 4 Flashcards

(54 cards)

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1
Q

What are the four taxpayer responsibilities in self-assessment?

A
  • File tax returns by the deadline
  • Pay the correct amount of tax
  • Provide CRA with adequate information to assess
  • Get help when necessary

CRA stands for Canada Revenue Agency.

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2
Q

What is a Progressive Tax System?

A

The larger a taxpayer’s income, the higher the rate of income tax owed.

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3
Q

Define Marginal Tax Rate.

A

Percent of tax paid on the next dollar of taxable income earned.

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4
Q

What is Average Federal Tax Rate?

A

Percent of total income tax payable over total taxable income.

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5
Q

What do Deductions do?

A

Eligible amounts reduce net/taxable income.

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6
Q

What do Credits do?

A

Eligible amounts reduce taxes owing.

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7
Q

What is the purpose of a T4 Slip?

A

Employer withholds and remits taxes to CRA for employment income.

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8
Q

What is the function of the TD1 form?

A

Establishes source deductions.

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9
Q

How is taxes on Self-Employment Income remitted?

A

Quarterly based on one of three methods: no calculation option, prior-year option, current-year option.

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10
Q

Fill in the blank: Interest Income in BC for 2024 has a Marginal Tax Rate of _______.

A

53.5%

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11
Q

What are the Marginal Tax Rates for Dividend Income in BC for 2024?

A
  • Foreign: 53.5%
  • Non-Eligible: 48.89%
  • Eligible: 36.54%
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12
Q

What is the income tax year-end date?

A

December 31.

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13
Q

When are tax returns filed and outstanding tax owing paid?

A

April 30 (following year).

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14
Q

What is the self-employed return filing deadline?

A

June 15.

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15
Q

What is the penalty for filing a return after the deadline?

A

5% of taxes owing.

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16
Q

What does the Notice of Assessment (NOA) confirm?

A

Confirms the submitted return or provides corrections.

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17
Q

List the steps to completing a T1 General Income Tax and Benefit Return.

A
  • Calculate Total Income
  • Subtract Deductions and Calculate Net Income
  • Calculate Taxable Income
  • Calculate Net Federal Tax Payable
  • Calculate Net Provincial Tax
  • Calculate Total Tax
  • Calculate Total Tax Already Paid
  • Refund or Balance Owing
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18
Q

What is a Refundable Tax Credit?

A

The portion of the credit not needed to reduce tax owing to zero is refunded.

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19
Q

Name two Federal Tax Credits.

A
  • GST/HST Tax Credit
  • Working Income Tax Benefit
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20
Q

Define Non-Refundable Tax Credit.

A

The portion of the credit not needed to reduce tax owing to zero will not be refunded.

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21
Q

What are some examples of Non-Refundable Tax Credits?

A
  • Medical Expenses
  • Tuition
  • Charitable Donations
  • Gifts to Canada/Provinces
  • Political Contributions
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22
Q

What are tax saving ideas?

Study These Flashcards
A
  • Tax-exempted
  • Tax-deferred
  • Tax-preferred
  • Deductible job-related expenses
23
Q

What are Tax Exempt Investments?

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A
  • Gains in an exempt life insurance contract
  • Gains in a TFSA
24
Q

What is a Tax-Free Savings Account (TFSA)?

Study These Flashcards
A

Canadian residents 18+ can invest; earnings not taxed, contributions not tax deductible.

25
What types of plans are considered Tax Deferred Plans?
* RRSP * RPP * IPP * DPSP
26
What is an RESP?
Registered Education Savings Plan for educational assistance payments.
27
What are the tax implications for an RDSP?
Tax-free earnings and growth on all deposits; contributions are NOT tax-deductible.
28
Progressive Tax System
The larger a taxpayer’s income, the higher the rate of income tax is owed
29
Marginal Tax Rate
Percent of tax paid on the next dollar of taxable income earned
30
Average Federal Tax Rate
Percent of total income tax payable over total taxable income
31
32
Progressive Tax System
The larger a taxpayer’s income, the higher the rate of income tax is owed
33
Marginal Tax Rate
Percent of tax paid on the next dollar of taxable income earned
34
Average Federal Tax Rate
Percent of total income tax payable over total taxable income
35
Deductions
Eligible amounts reduce net/taxable income
36
Credits
Eligible amounts reduce taxes owing
37
Taxes on Employment Income (T4 Slip)
Employer withholds and remits to CRA
38
TD1
Establishes source deductions
39
Taxes on Self-Employment Income
Remitted quarterly based on one of the 3 methods
40
How are taxes on self-employment paid
1. Pay amounts indicated on reminders sent by CRA a. No calculation option 2. Pay based on prior years net tax owing + CPP premiums payable a. Prior-year option 3. Pay based on estimated current year tax + CPP premiums owing a. Current-year option
41
April 30 (following year)
* Tax returns filed * Payment of outstanding tax owing
42
June 15
Self-employed return filing deadline
43
Penalty
Return filed after the deadline (5% of taxes owing)
44
Interest
1% of balance owing for each month late
45
Notice of Assessment (NOA)
* Confirms the submitted return or provides corrections * Provides RRSP contribution limits for the following year * Cheque attached if a tax refund is payable
46
Steps to Completing T1
1. Calculate Total Income 2. Subtract Deductions (and Calculate Net Income) 3. Calculate Taxable Income 4. Calculate Net Federal Tax Payable 5. Calculate Net Provincial Tax 6. Calculate Total Tax 7. Caulcate Total Tax Alreadu Paid 8. Refund or Balance Owing
47
Refundable Tax Credit
The portion of the credit not needed to reduce tax owing to zero is refunded (GST/HST Tax Credit)
48
Non-Fundable Tax Credit
The portion of the credit not needed to reduce tax owing to zero will not be refunded (Tution, Medical Expense, Charity)
49
Tax Free Savings Account (TFSA)
* Canadian residents 18+ * Investment earnings not taxed * Contributions are not tax deductible * No limit to contribution room carry forward * Withdrawals do not affect eligibility for income-tested benefits and credits
50
RRSP RPP IPP DPSP
* Registereed Retirement Savings Plan * Registered Pension Plan * Individual Pension Plan * Deferred Profit-Sharing Plan
51
RESP
Registered Education Savings Plan Contribution not tax deductible ($50,000 max) Government Matching Grants (CESG and CLB)
52
RESP Educational Assistance Payment
Paid to beneficiary (Income and grants taxed as "Other Income)
53
RESP Accumulated Income Payment
* Paid to subsciber and fully taxable + 20% penalty * May shleter up to $50,000 in RRSP
54
RDSP
* Registered Disabiltity Savings Plan * Tax-free earnings and growth on all deposits * Contributions NOT tax-deductible (Max $200,000 and 59 or younger) * Only beneficiary entitle to payments

BCIT BUSA 2150 (13 decks)

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