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BIOL 1500 (53)
Chapter 3

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University of Guelph
BIOL 1500
Marie Therese Rush

Chapter 3Planning Your Tax StrategyTaxes and Financial Planning being familiar with tax rules and regulations can help you to maximize aftertax cash flows and net worth tax planning can influence spending saving borrowing and investing decisionsknowing tax laws and maintaining accurate tax records allows you to take advantage of appropriate tax benefits wide variety of taxes affects financial planning including sales excise property estate inheritance gift and state and local income taxesFour Major Categories Where People Pay Taxes1 taxes on purchasespay taxes on purchases HST federal goods and services tax GST and sales taxmost food items and prescription drugs are exempt from sales taxExcise taximposed on specific goods and services gas cigarettes alcoholic beverages tires air travel telephone service2 taxes on property real estate property tax is major sourcebased on assessed value of land and buildings3 taxes on wealthcurrently federal and provincial governments impose tax on increase in individuals wealth capital gains taxsale of asset stock or bond can trigger capital gain or loss or transferring ownership of asset through gift or inheritancebequests and property passed on to heirs other than spouse are received after tax4 taxes on earnings income taxes are used by federal government to support number of social benefit programs Old Age Security pension Canada Pension Plan and Employment Insurancethroughout year employer withholds income tax amounts from your paycheque and you may be required to make income tax instalments if you earn income from other sources ie businessmay need to pay additional amount when you file your income tax return or you may get a tax refundTop Ten Filing Errors 1 mathematical errors adding subtracting amounts incorrectly2 forgetting to reduce income by identifying workers compensation social assistance payments and net federal supplements3 calculating and claiming provincial tax credits incorrectly4 not including pension adjustments which affect RRSP contribution room for this coming year5 claiming GSTHST credits incorrectly by using incorrect spousal income amounts6 entering the wrong amounts on lines referring to Canada Pension Plan and Employment Insurance contribution and overpayments7 claiming incorrect amounts as RRSP contributions8 forgetting to claim basic personal amount9 claiming spousal amount incorrectly10 forgetting to claim the age amount or claiming it incorrectly Deadlines and Penalties thmost people are required to file federal tax returns by April 30 each yearif you or your spouse has business income than you have until June 15 to file your return even though return is not due until June 15 you still are required to pay any balance of tax owing by April 30no obligation to file return in years that you have no tax to pay for the year both parents must file return to qualify for family support payments and GST refunds5 penalty on balance owing if you fail to submit return on required date and 1 for each month after that it is late to a total of 12 months
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