By John Shmuel
The moment you started working, all kinds of doors opened: you could pay for your own clothes, your own gas money, your own cell phone.
But there’s something your parents didn’t warn you about: income taxes.
Now, if you’re lucky, your parents filled out your taxes the first couple of years. Maybe you’ve never even had a part-time job. Even so, it’s worth filing a tax return — fill out the right forms and you can make a few bucks without even having a job. Now, if you think you’ve read something like this before, you probably have. But since taxes are always due April 30 anyway, it doesn’t hurt to brush up before going through that shoe box of receipts sitting in your closet.
So pay attention as we go through the finer points of paying off the tax man.
Most students have low total income so it seems like there is little advantage to filling out a tax return— other than the whole jail thing, but more on that later. However, Perry Jensen, a spokesperson for the Institute of Chartered Accountants of Ontario (ICAO), says students will benefit from learning to do their taxes as soon as possible. Besides,with your low income, the whole thing will be relatively painless in terms of owing money. In fact, you’ll probably get a refund.
“Obviously if you have a low income, most of the taxes you’re paying, you’re going to get back.The government doesn’t really widely tell people this,” he said.
The first thing to keep in mind, Jensen said,is to start early. Seems like a no-brainer, but you don’t want to delay your taxes the way you delay an essay. Increasing the amount you receive back will depend heavily on things like deductibles,tax credits and making sure you report all income sources.
Why evading taxes is a bad idea if you’ve never earned any income, then you can get away with not filing a tax return this year.However, as you will see, even the never-employed can claim credits for cold, hard cash.
But once you’ve entered the world of the gainfully employed, you have to file your taxes each April.
So what happens if you don’t?
The CRA website states anybody who does not file a return is guilty of a summary offense.If convicted, you’re subject to a fine of between$1,000 and $25,000, or both the fine and imprisonment for up to 12 months for each count.
And just to rub it in, you still have to pay the back taxes, which will be subject to daily compound interest.
Things everybody should know
As you’ve no doubt figured out already, there’s a lot of paper work involved with filing your taxes.Bear through this and soon we’ll get to the refund parts.
Now, there’s a couple of forms that you need to focus on. Keep in mind your tax return is based on your income and deductible items for 2007,ending on Dec. 31.
T4 forms are mailed to you by your employer(or employers), and deal with your total employment income for the year. Even if your boss doesn’t send you one (you should hound them until they do) you still need to report that income.However, if your only source of income is the bank of mom and dad, you won’t get any T4s.
T5 forms deal with investment income. The deadline for these is March 1, which is already past. Sorry. In any case, most students won’t be dealing with these forms because they involve annuity contracts, loans to corporations or organizations(as an investment) and accounts with investment dealers and brokers, which are beyond the minuscule budget of the average student.
Common forms all students will deal with areT1s (basic information about you like your name and address) and T2202 tuition forms (how much you paid for tuition, which affects how much you can deduct).
T2202 forms are available at the financial aid office and you can also print them off of RAMSS.
To get a hold of these forms, You can go to the Canada Revenue Agency’s website, call them by phone, or pick one up at any Canada Post or ServiceCanada location (the nearest Service Canada site relative to Ryerson is at City Hall). You can even get them mailed to you.
Squeezing every last penny
As a student, you’ll probably fall under a few different categories that will determine how much of a tax return you get. This includes whether you have a part-time or full-time job, any sorto f investments, whether you live on your own or at home, and whether you have dependents. But wherever you fall on the spectrum, there are tax credits and deductibles you can access.
“There are many different types of tax credits you may be eligible for, despite your financial situation,” Jensen says. “These include things like the GST tax credit, the Ontario personal tax credit, child tax benefits — if you happen to have children. There are a number of things you can qualify for.”
And for some, like the GST tax credit, you can start claiming as soon as you turn 19. The minimumGST tax credit is $57 per quarter.
Once you get your T1s and T4s in order (which is what the bulk of students at Ryerson will be dealing with), you can start looking for anything you can write off as deductible.
Common items students can claim credit for include tuition, textbooks, your Metropass and even charitable donations. Check out the glossary for information on others. There is also a list of more than 100 deductibles posted on the CRA’s website.
However, tax credits earned from tuition and textbooks can only be claimed if you make the minimum amount ($9,600 a year). But don’t worry.Even if you don’t, the government holds on to the money until you do, meaning you can defer your credits to the next tax year.
Cleo Hamel, a senior tax analyst at H&R Block,said these types of tax credits are also transferable.
“The money is transferable to a parent,grandparent or spouse, in the year that you file the [T2202 tuition form],”she says. “So if you have a receipt for2007, and if you can’t claim the money because you don’t have any income,this might be something to consider.”
The Community Volunteer Income Tax Program, offers free filing for anyone without a dependent, such as a student, earning less than $20,000annually. If you’re married or a single parent, you still qualify if your income is less than $30,000.
The Tax Clinic Program, offered by ICAO, will also help do filings for free. However, you must earn less than $17,000 without dependents or$25,000 max with dependents.
The RSU also hosts a free tax clinic,but all the appointment slots have already been filled. Maybe next year.
You can also try out UFile, a computer program that helps you with your tax return. Students can download the software for free at UFile.ca.
Once your tax return package is finished, you have several ways to get it to the Canada Revenue Agency.
One option is to do it over the Internet using Netfile, which can be downloaded from the Canada Revenue Agency’s website. Or you can go down to 1 Front St. W, where you can drop off your package to Canada Taxes.Once your tax return package is sent out, you can check its status on the Canada Revenue Agency’s website by signing up for an account. Congratulations,you just filed your taxes.
The bottom line
Depending on how you sent in your tax package, you can wait from two to six weeks to get your money.
How much money you get back depends in large part on your income, whether you live on your own, and any applicable deductibles and credits that you filled out.
But if you’ve followed our guide and played your forms right, you can get more than $1,000. Not bad for a few hours of tedious paperwork.
Tax deduction: An expense incurred by a tax payer (for example, student tuition) that is subtracted from the gross income when a tax payer calculates their income tax. This lowers your overall tax paid.
Tax credit: The same as a tax deduction. However, instead of lowering your overall tax paid, you just get money back on expenses incurred dollar-for-dollar.
Ontario personal tax credit: Used by your employer or payer to determine the amount of your provincial tax deductions.
GST tax credit: The Goods and Services Tax credit is a tax-free quarterly payment made to low and middle income earners to give money back to those who pay the GST on items in Canada.
Common credits and deductibles
Tuition: Take your total tuition and multiply by 15 per cent (minimum personal income tax rate) to get your total tuition deductible.
Textbooks: Full-time students canclaim $65 a month while part-time students get $25 for every month youare enrolled as a student.
Metropasses: Take the amount you paid for your Metropasses ($96 each through the RSU) and then mulitply by 15 per cent to arrive at your total transit pass credit.
Education amount: this gives full-time students $400 a month and part-timers $120 a month for each month in school.
Scholarships: The full amount of all scholarships, bursaries and fellowship grants are no longer considered income and not taxable.