School me on tax

[Russell]

I know it is very early in the year but I have no idea really how tax returns work. This up coming tax return will be much different from all my previous ones as I am on my internship (which means I am not considered a full time student by the government, although U of C still sees me as a full time student). I have a few questions about the TD1 form and just want a general idea of what I will get in my return.

The basic personal amount listed on the TD1 (Fed = 8929 and Prov = 15435) am I not taxed on?

When I filled out my TD1 I did not list any of the school that I took during winter 2007, a deduction of about $5400 from the Fed and $5700 from the Prov. How is this deduction used? (Is this subtracted from my total yearly income, so could it put my in a lower tax bracket?).

Final question, how are taxes calculated for subtractions off of your pay? Like lets say a person makes $5000/month, when they calculate how much to subtract a month do they figure out what that person will make over the year, calculate the taxes for a year and then just subtract that monthly?

[Kor]

Re: School me on tax

Just give me your paychecks each month and I will make sure that the tax goes to the right place and that you get some money too.

[Chris]

Re: School me on tax

Just give me your paychecks each month and I will make sure that the tax goes to the right place and that you get some money too.

LOL

Seriously, though, you should talk to Blair a.k.a. CanadianTurbo. Not only is he club prez, he's also an accountant.

[Russell]

Re: School me on tax

Haha

Wow now that is an offer I can refuse

[Canadian Turbo]

Re: School me on tax

Well there are lots of issues to cover, I would suggest not putting any tuition amounts on your TD1 as you may not know exactly how much you will get on your T2200 from the UofC, and then you will more likely get a refund then having to pay come April.

Tuition works on a tax credit basis, the amount is not simply just deducted from your income. The tuition gives you a credit so lets say $5400 from your example and you get 16% so thats $864 towards the taxes you pay, as an example.

The taxes on a payroll are based on what it would be for a year and pro-rated per pay period. There is also EI and CPP deductions to consider and it uses that initial basic personal amount, which if you start 2 different jobs in 1 year sometimes they take that twice.

Hope this helps you out a bit.

[Russell]

Re: School me on tax

you get 16% so thats $864 towards the taxes you pay, as an example.

So if I have been paying my taxes I should get this $865 back?

The taxes on a payroll are based on what it would be for a year and pro-rated per pay period. There is also EI and CPP deductions to consider and it uses that initial basic personal amount, which if you start 2 different jobs in 1 year sometimes they take that twice.

So I have only been working for 8 months, thus I should only be getting taxes taken off for the 8 months I will have worked this year.

[Russell]

Re: School me on tax

where does the 16% come from?

[Canadian Turbo]

Re: School me on tax

If you were to owe $2,456 in tax for the total year and you paid it all then you would get $864 refunded.

Tax is calculated on the money you make, the timing is not that important it, if you only worked 8 months you only got taxed for 8 months, they just use the pro-ration to calculate deductions and place you in a tax bracket. When you file your annual tax return everything as added together and accounted for, if you have things like tuition then you should usually be in a refund position assuming you don't have investments and other things.

The amount of the tuition tax credit is determined by multiplying the lowest personal tax rate percentage by the amount of eligible tuition fees paid for the year, which was 16% previously.

[Russell]

Re: School me on tax

Great, that answers all of my questions!