I am always amazed at how worked up some people get during income-tax time. They act as if figuring out one’s own tax form is more difficult than building a rocket ship to Mars. This is ridiculous because everyone knows that building a space ship is a lot harder than doing your taxes.
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The biggest problem at tax time, as I see it, is that most people just don’t follow the simple and straightforward instructions laid out in the Tax Guide. If they did, there wouldn’t be all this flap every March and April and I wouldn’t have to waste valuable newspaper space explaining all this to you. But humans being what we are, many of us are slow to learn. So, I’ll go through it for you again.
Here are the answers to the five questions I’m most frequently asked with regards to filing an income tax return.
1.
Question: How do I qualify for a Sales Tax Credit?
Answer: Follow this simple formula. Take your net income ($20,000, for example) and double it (to $40,000). Now, subtract 25 per cent of that amount ($40,000 less $10,000 equals $30,000) and add $50 ($30,050). Multiply that figure by three ($90,150) and divide that amount in half ($45,075). That number is now your Sales Tax Credit Factoring Ratio. From this amount, subtract $500,000 and enter the difference or nil (whichever is greater) on Line 405 of your tax form. That figure is the amount you may claim as your Sales Tax Credit.
2.
Question: How do I qualify for the Age Exemption and how much may I claim?
Answer: If you were born before 1852, you may increase your Basic Personal Exemption by $50. However, if asked, you may be required to have a parent or guardian sign an Age Verification Certificate.
3.
Question: Is there a tax advantage that comes with marriage?
Answer: Yes. Simply calculate your net income ($20,000, for example) and your spouse’s net income ($20,000). Now, subtract your income from your spouse’s income ($20,000 less $20,000), double the remaining amount and add this to your Basic Personal Exemption. By the way, if you are Equivalent To Married (common law), you may claim 85 per cent of the Married Amount. If you are Almost Nearly Married, claim 65 per cent. If you know someone who’s married, 50 per cent. If you’ve heard about marriage, 25 per cent.
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4.
Question: What is a capital loss?
Answer: Brutus Bilgewater sells ice cream cones for a living. Normally, he receives an average $1 per sale. However, one day a hungry American Pit Bull Terrier comes along and sticks his face (and tongue) into Bilgewater’s supply of ice cream, rendering it unfit for retail. The cost of this ice cream can be deducted from his income as an Allowable Capital Loss. However, he must not include the cost of the cones, nuts, chocolate sauce or napkins nor may he claim for the slacks he tore as he scaled a fence in an attempt to escape the dog he was foolish enough to scold.
5.
Question: Under the tax credit for Gifts to Canada, may I simply claim the entire amount of income tax I am required to pay as one big gift, thereby allowing me to get most of it back?
Answer: No. A gift is something given willingly. Your income-tax payment, therefore, obviously does not qualify.
©1990 Jim Hagarty
