Answer key will follow
Alert: information
You will be able to see the answers by selecting the "Show answers" button after the scenario and information.
This exercise uses a simplified version of the income tax and benefit return to show you the basic calculations for each step.
The amounts shown are not actual tax brackets, tax rates or credit values. Do not use them to do your taxes or to check calculations done by certified tax software or on official paper tax forms.
Certified tax software will calculate most amounts based on the information you input. These amounts are provided to you for you to complete this exercise manually.
If you are a resident of Quebec, you will complete a separate provincial tax return with Revenu Québec.
Select a scenario to get started
- Jonah quits the bakery: start exercise
- Terry keeps track of tips: start exercise
- Farah gets a degree: start exercise
- Chayton lives on reserve: start exercise
Jonah quits the bakery
Jonah worked full-time at a local bakery last year until July, when he quit his job to travel for a month before going back to school.
He did not have any additional income for the year.
Jonah received a T4 slip, Statement of Remuneration Paid, from the bakery.
Details of Jonah's T4 slip
Employer's name: Casey's Bakery
Employee's name and address:
- Last name: Smith
- First name: Jonah
- Address:
- 1 Home Avenue
City, Newfoundland and Labrador, X0X 0X0
Income and other information:
- Box 10: Province of employment – NL
- Box 12: Social Insurance Number – 123 456 789
- Box 14: Employment income – $18,000.00
- Box 16: Employee's CPP contributions – $870.90
- Box 18: Employee's EI premiums – $284.40
- Box 20: RPP contributions – $675.00
- Box 22: Income tax deducted – $2,209.80
- Box 24: EI Insurable earnings – $18,000.00
- Box 26: CPP/QPP pensionable earnings – $18,000.00
- Box 85: Other information (explained on reverse side of slip) – $76.50
- This box represents employee-paid premiums for a private health services plan.
Complete Jonah’s calculationsComplete Jonah’s calculations (with answers)
Use the information to fill out the simplified tax return to find out if Jonah will get a refund or have a balance owing.
For this example, you will be able to validate your amounts, calculations and final answer at the end of the exercise.
Terry keeps track of tips
Terry is 18 and works at a pizza restaurant, where she earns hourly wages and tips.
Last year Terry received $997.60 in cash tips, in addition to her salary. Terry kept track of her cash tips because her employer does not record this information.
Terry received a T4 slip, Statement of Remuneration Paid, from her employer.
Details of Terry's T4 slip
Employer's name: Plaza di pizza
Employee's name and address:
- Last name: Lee
- First name: Terry
- Address:
- 123 Main Street
City, British Columbia, X0X 0X0
Income and other information:
- Box 10: Province of employment – BC
- Box 12: Social Insurance Number –777 777 777
- Box 14: Employment income – $12,000.00
- Box 16: Employee's CPP contributions – $480.00
- Box 18: Employee's EI premiums – $200.00
- Box 22: Income tax deducted – $200.00
- Box 24: EI Insurable earnings – $12,000.00
- Box 26: CPP/QPP pensionable earnings – $12,000.00
Complete Terry's calculationsComplete Terry's calculations (with answers)
Use the information to fill out the simplified tax return and determine if Terry is getting a refund or has a balance owing.
For this example, you will be able to validate your amounts, calculations and final answer at the end of the exercise.
Farah gets a degree
Farah is working part-time at a local bookstore and is pursuing her degree on a part-time basis at the City College which granted her a scholarship. She also receives income support from the Ontario Disability Support Program. To help Farah with her tuition fees, she received payments from her registered education savings plan (RESP).
Farah has a physical impairment and has been deemed eligible to claim the disability tax credit (DTC). Although Farah is attending school part-time, she is considered a full-time student for scholarship exemption purposes because she is eligible for the DTC.
Farah received a T5007, Statement of Benefits, from Income support from the Ontario Disability Support Program (ODSP).
Details of Farah’s T5007 slip
Recipient’s name and address:
- Last name: Awan
- First name: Farah
- Address:
- 123 Main Street
City, Ontario, X0X 0X0
Income and other information:
- Box 11: Social assistance payments or provincial or territorial supplements – $14,000.00
- Box 12: Social insurance number – 000 000 000
Farah received a T4 slip, Statement of Remuneration Paid, from her employer.
Details of Farah’s T4 slip
Employer’s name: Local Bookstore
Employee’s name and address:
- Last name: Awan
- First name: Farah
- Address:
- 123 Main Street
City, Ontario, X0X 0X0
Income and other information:
- Box 10: Province of employment – ON
- Box 12: Social insurance number – 000 000 000
- Box 14: Employment income – $10,000.00
- Box 16: Employee’s CPP contributions – $385.00
- Box 18: Employee’s EI premiums – $150.00
- Box 22: Income tax deducted – $0.00
- Box 24: EI Insurable earnings – $10,000.00
- Box 26: CPP/QPP pensionable earnings – $10,000.00
Farah received a T4A slip, Statement of Pension, Retirement, Annuity, and Other Income, from her school for her scholarship.
Details of Farah’s T4A slip
Payer’s name: City College
Recipient’s name and address:
- Last name: Awan
- First name: Farah
- Address:
- 123 Main Street
City, Ontario, X0X 0X0
Other information:
- Box 12: Social insurance number – 000 000 000
- Box 105: Scholarships, fellowships, bursaries, and artists' project grants (explained on reverse side of slip) – $4,500.00
Farah received a T4A slip, Statement of Pension, Retirement, Annuity, and Other Income, from her financial institution for her RESP payments.
Note: Your financial institution will only report the taxable portion of your RESP payments on your T4A slip.
Details of Farah’s T4A slip
Payer’s name: Financial Institution
Recipient’s name and address:
- Last name: Awan
- First name: Farah
- Address:
- 123 Main Street
City, Ontario, X0X 0X0
Other information:
- Box 012: Social insurance number – 000 000 000
- Box 042: RESP educational assistance payments (explained on reverse side of slip) – $5,700.00
Farah received a Form T2202, Tuition and Enrolment Certificate, from her school for her tuition fees.
Details of Farah’s Form T2202
Name and address of designated educational institution:
- City College
1 Study Road
City, Ontario, X0X 0X0
Additional information:
- Box 11: School type - 2 (College)
- Box 13: Name of program or course - Degree
- Box 14: Student number - 123456789
- Box 17: Social insurance number (SIN) - 000 000 000
Student’s name: Farah Awan
Student address:
- 123 Main Street
City, Ontario, X0X 0X0
Session periods 1:
- Box 19: From YY/MM - XX/01
- Box 20: To YY/MM - XX/04
- Box 21: Number of months part-time - 4
- Box 23: Eligible tuition fees, part-time and full-time - $3,000.00
Session periods 2:
- Box 19: From YY/MM - XX/09
- Box 20: To YY/MM - XX/12
- Box 21: Number of months part-time - 4
- Box 23: Eligible tuition fees, part-time and full-time - $3,000.00
Totals:
- Box 25: Total number of months part-time - 8
- Box 26: Total eligible tuition fees, part-time and full-time - $6,000.00
Complete Farah’s calculationsComplete Farah’s calculations (with answers)
Use the information to fill out the simplified tax return to find out if Farah will get a refund or have a balance owing.
For this example, you will be able to validate your amounts, calculations and final answer at the end of the exercise.
Chayton lives on reserve
Chayton lives on reserve and worked part-time at The Gas Station located off reserve last year. After he received his electrician’s professional certificate, he started working on reserve at the Local Electricians.
Note: The Canada Revenue Agency uses the term “Indian“ because it has a legal meaning in the Indian Act.
Chayton’s employment income from The Gas Station is taxable as:
- he worked off reserve
- his employer is located off reserve
Chayton’s employment income from the Local Electricians is tax exempt as:
- he is registered under the Indian Act
- he lives on reserve
- he works on reserve
- his employer is also located on reserve
Chayton received a T4 slip, Statement of Remuneration Paid, from his employer located off reserve.
Details of Chayton’s T4 slip
Employer’s name: The Gas Station
Employer’s address:
- 1 Town Road
City, Quebec X0X 0X0
Employee’s name and address:
- Last name: Papatie
- First name: Chayton
- Address:
- 123 Main Street
First Nation Reserve, Quebec, X0X 0X0
Income and other information:
- Box 10: Province of employment - QC
- Box 12: Social insurance number - 123 456 789
- Box 14: Employment income - $7,000.00
- Box 17: Employee’s QPP contributions - $350.00
- Box 18: Employee’s EI premiums - $100.00
- Box 22: Income tax deducted - $200.00
- Box 24: EI Insurable earnings - $7,000.00
- Box 26: CPP/QPP pensionable earnings - $7,000.00
- Box 55: Employee’s PPIP premiums - $50.00
- Box 56: PPIP insurable earnings - $7,000.00
Chayton received a T4 slip, Statement of Remuneration Paid, from his employer located on reserve.
Details of Chayton’s T4 slip
Employer’s name: Local Electricians
Employer’s address:
- 1 Main Street
First Nation Reserve, Quebec X0X 0X0
Employee’s name and address:
- Last name: Papatie
- First name: Chayton
- Address:
- 123 Main Street
First Nation Reserve, Quebec X0X 0X0
Income and other information:
- Box 10: Province of employment - QC
- Box 12: Social insurance number - 123 456 789
- Box 17: Employee’s QPP contributions - $450.00
- Box 18: Employee’s EI premiums - $550.00
- Box 24: EI Insurable earnings - $40,000.00
- Box 26: CPP/QPP pensionable earnings - $40,000.00
- Box 44: Union dues - $150.00
- Box 55: Employee’s PPIP premiums - $200.00
- Box 56: PPIP insurable earnings - $40,000.00
- Box 71: Other information (explained on reverse side of slip) - $40,000.00
- This box represents the Indian Act (exempt income) - Employment.
Complete Chayton’s calculationsComplete Chayton’s calculations (with answers)
Use the information to fill out the simplified tax return to find out if Chayton will get a refund or has a balance owing.
For this example, you will be able to validate your amounts, calculations and final answer at the end of the exercise.
Keep in mind that residents of Quebec are filling a provincial tax return. Therefore, you will not see any reference to provincial taxes or credits.
Note: Before you proceed reset the input fields if you have filled out a previous scenario.
Step 1: Identification
Enter the individual's personal information.
Review the tax information and enter the information in the correct spaces.
- Name: Jonah Smith
- SIN: 123 456 789
- Name: Terry Lee
- SIN: 777 777 777
- Name: Farah Awan
- SIN: 000 000 000
- Name: Chayton Papatie
- SIN: 123 456 789
Compare your answers to the answers provided at the end of the exercise.
Step 2: Total income
Calculate the individual's total income.
Review the tax information and complete the calculations.
- Jonah’s total income includes:
- the employment income of $18,000.00 shown in box 14 of his T4 slip
- He did not have any additional income.
- Terry’s total income includes:
- employment income of $12,000.00 shown in box 14 of her T4 slip
- cash tips received for an amount of $997.60 not shown on an information slip
- Farah’s total income includes:
- the employment income of $10,000.00 shown in box 14 of her T4 slip
- additional income:
- income support from the ODSP of $14,000.00 shown in box 11 of her T5007 slip
- payments of $5,700.00 from her RESP shown in box 042 of her T4A slip
Note: Farah does not need to report her scholarship as income when she does her taxes because she is eligible for the DTC and is considered a full-time student for scholarship exemption purposes.
Farah may also receive additional grants from federal, provincial or territorial governments.
- Chayton’s total income includes:
- the employment income of $7,000.00 shown in box 14 of his T4 slip from The Gas Station.
- the exempt income of $40,000.00 shown in box 71 of his T4 slip from the Local Electricians is not entered here. As instructed on the back of the T4 slip, Chayton will complete the Form T90, Income Exempt from Tax under the Indian Act to report the exempt income.
- He did not have any additional income.
Compare your answers to the answers provided at the end of the exercise.
Step 3: Net income
Calculate the individual's net income.
Review the tax information and complete the calculations.
- Jonah’s deductions for calculating net income are $950.00.
What his deductions include
- registered pension plan (RPP) contributions shown in box 20 of his T4 slip
- union dues shown in box 44 of his T4 slip
- enhanced Canada Pension Plan (CPP) contributions, calculated using CPP contributions shown in box 16 of his T4 slip
- Terry’s deductions for calculating net income are $625.00.
What her deductions include
- RRSP contributions shown on a receipt
- an image of this receipt is not provided here
- enhanced CPP contributions, calculated using CPP contributions shown in box 16 of her T4 slip
- Farah’s deductions for calculating net income are $65.00
What her deductions include
- enhanced CPP contributions, calculated using CPP contributions shown in box 16 of her T4 slip
- Chayton’s deductions for calculating net income are $150.00.
What his deductions include
- union dues shown in box 44 of his Local Electricians T4 slip.
Enter the total income
from Step 2
Minus the total deductions
for calculating net income
Compare your answers to the answers provided at the end of the exercise.
Step 4: Taxable income
Calculate the individual's taxable income.
Review the tax information and complete the calculations.
- Jonah's deductions for calculating taxable income are $0.00.
- Terry's deductions for calculating taxable income are $0.00.
- Farah's deductions for calculating taxable income are $14,000.00 from the ODSP as this income is not taxable.
- Chayton's deductions for calculating taxable income are $0.00.
Enter the net income
from Step 3
Minus the total deductions
for calculating taxable income
Equals the taxable income
Compare your answers to the answers provided at the end of the exercise.
Step 5: Federal tax
Calculate the federal tax.
Part A: Calculate the federal tax using the correct tax bracket
To calculate Jonah's federal tax:
To calculate Terry's federal tax:
To calculate Farah's federal tax:
To calculate Chayton's federal tax:
- Select the tax bracket
- Enter the taxable income from Step 4 in the column for the appropriate tax bracket
- Use the table below to complete the calculation in that column
Tax brackets
(fill in only one tax bracket)(fill in tax bracket 1)(fill in tax bracket 2)(fill in tax bracket 3)(fill in tax bracket 4)
| |
Tax bracket
1 |
Tax bracket
2 |
Tax bracket
3 |
Tax bracket
4 |
| Taxable income |
$49,999 or less |
$50,000 to $99,999 |
$100,000 to $149,999 |
$150,000 or more |
| Enter the taxable income from Step 4 |
|
|
|
|
| Enter the taxable income from Step 4 (Answer) |
|
|
|
|
| Enter the taxable income from Step 4 (Answer) |
|
|
|
|
| Enter the taxable income from Step 4 |
|
|
|
|
| Enter the taxable income from Step 4 (Answer) |
|
|
|
|
| Subtract this amount from taxable income |
minus 0.00 |
minus 49,999.00 |
minus 99,999.00 |
minus 149,999.00 |
| Equals taxable income subject to federal tax rate |
equals
|
equals
|
equals
|
equals
|
| Equals taxable income subject to federal tax rate (Answer) |
|
|
|
|
| Equals taxable income subject to federal tax rate (Answer) |
|
|
|
|
| Equals taxable income subject to federal tax rate(Answer) |
|
|
|
|
| Equals taxable income subject to federal tax rate(Answer) |
|
|
|
|
| Multiply by the federal tax rate |
multiplied by 10%
(Multiply by 0.10) |
multiplied by 20%
(Multiply by 0.20) |
multiplied by 30%
(Multiply by 0.30) |
multiplied by 40%
(Multiply by 0.40) |
| Equals tax after multiplying by the federal tax rate |
equals
|
equals
|
equals
|
equals
|
| Equals tax after multiplying by the federal tax (Answer) |
|
|
|
|
| Equals tax after multiplying by the federal tax (Answer) |
|
|
|
|
| Equals tax after multiplying by the federal tax rate (Answer) |
|
|
|
|
| Equals tax after multiplying by the federal tax rate (Answer) |
|
|
|
|
| Add federal tax calculated on income in the lower tax brackets |
plus 0.00 |
plus 4,999.90 |
plus 14,999.70 |
plus 29,999.40 |
| Equals federal tax on taxable income |
equals
|
equals
|
equals
|
equals
|
| Equals federal tax on taxable income (Answer) |
|
|
|
|
| Equals federal tax on taxable income (Answer) |
|
|
|
|
| Equals federal tax on taxable income (Answer) |
|
|
|
|
| Equals federal tax on taxable income (Answer) |
|
|
|
|
Reminder: This exercise is using simplified tax rates. They are different than the tax rates used on the actual tax return.
Part B: Calculate the federal tax using non-refundable tax credits
Review the tax information and complete the calculations.
- Jonah’s federal non-refundable tax credits are $16,500.00.
What his non-refundable tax credits include
- the basic personal amount
- CPP contributions calculated using amounts shown in box 16 of his T4 slip
- employment insurance (EI) premiums shown in box 18 of his T4 slip
- the Canada employment amount
- tuition amounts calculated using amounts shown on a T2202, Tuition and Enrolment Certificate
- an image of this form is not provided here
- Jonah’s eligible medical expenses, including premiums for private health services plan shown in box 85 of his T4 slip
- Terry’s federal non-refundable tax credits are $15,000.00.
What her non-refundable tax credits include
- the basic personal amount
- CPP contributions calculated using amounts shown in box 16 of her T4 slip
- employment insurance (EI) premiums shown in box 18 of her T4 slip
- the Canada employment amount
- Farah’s federal non-refundable tax credits are $26,265.00.
What her non-refundable tax credits include
- the basic personal amount
- CPP contributions calculated using amounts shown in box 16 of her T4 slip
- employment insurance (EI) premiums shown in box 18 of her T4 slip
- the Canada employment amount
- disability amount (for self)
- Chayton’s federal non-refundable tax credits are $17,520.00.
What his non-refundable tax credits include
- the basic personal amount
- QPP contributions calculated using amounts shown in box 17 of his T4 slips
- employment insurance (EI) premiums shown in box 18 of his T4 slips
- PPIP amount calculated using amounts shown in box 55 of his T4 slips (Only when a resident of Quebec at the end of the tax year, who worked in Quebec during the year)
- the Canada employment amount
Enter the federal non-refundable tax credits
Multiply by the federal non-refundable tax credit rate
Multiply by 0.10
Equals the total federal non-refundable tax credits amount
Enter the federal tax on taxable income
from the table above
Minus the total federal non-refundable tax credits amount
Equals the federal tax
If negative, enter "0"
(Remember, non-refundable tax credits can only reduce tax to zero.)
Note 1: Farah chose to transfer her tuition credits to her parents. Any remaining unused tuition credits will be carried forward to reduce the taxes she owes in a future year.
Note 2: Farah also chose to transfer her unused DTC to one of her parents.
Provincial or territorial tax
You will do a similar calculation to figure out the provincial or territorial taxes you might owe. You will report this amount in Step 6.
Note: If you lived in Quebec on December 31 of the tax year, you will calculate your provincial taxes by completing a separate provincial tax return for Revenu Québec.
Compare your answers to the answers provided at the end of the exercise.
Step 6: Refund or balance owing
Calculate to see if the final result is a refund or a balance owing.
Review the tax information and complete the calculations.
- Jonah's provincial tax is $16.00
- When you do your taxes, a similar calculation is done for provincial or territorial taxes as for federal tax (Step 5).
- For this exercise, the completed calculation is provided.
- Jonah’s total income tax deducted at source is $2,209.80, as shown in box 22 of his T4 slip
- Jonah’s refundable tax credits are $0.00
- Terry’s provincial or territorial tax is $0.00
- When you do your taxes, a similar calculation is done for provincial or territorial taxes as for federal tax (Step 5).
- For this exercise, the completed calculation is provided.
- Terry’s total income tax deducted at source is $200.00, as shown on her T4 slip
- Terry’s refundable tax credits are $25.00.
What her refundable tax credits include
- CPP overpayments, calculated using amounts shown in box 16 of her T4 slip
- EI overpayments, calculated using amounts shown in box 18 of her T4 slip
- Farah’s provincial or territorial tax is $0.00
- When you do your taxes, a similar calculation is done for provincial or territorial taxes as for federal tax (Step 5).
- For this exercise, the completed calculation is provided.
- Farah’s total income tax deducted at source is $0.00, as shown in box 22 of her T4 slip
- Farah’s refundable tax credits are $1,600.00.
What her refundable tax credits include
- Farah’s Canada workers benefit (CWB) including the CWB disability supplement.
- Chayton’s provincial or territorial tax is $0.00
- Chayton’s provincial tax is calculated on a separate provincial tax return for Revenu Quebec
- For this exercise, the completed calculation is provided.
- This exercise includes both the federal and provincial tax calculations.
- Chayton’s actual federal tax return will not have a provincial or territorial tax.
- Chayton’s total income tax deducted at source is $200.00, as shown in box 22 of his T4 slip
- Chayton’s refundable tax credits are $0.00
Enter the federal tax
from Step 5
Plus the provincial
or territorial tax
Enter the tax deducted at source
Plus the eligible refundable tax credits
Equals the final result
A positive result represents a balance owing, and a negative result represents a refund.
Compare your answers to the answers provided at the end of the exercise.
Answer
Jonah will receive a refund of.
If you have provided an answer, you can:
Jonah will have a balance owing of.
If you have provided an answer, you can:
Terry will receive a refund of.
If you have provided an answer, you can:
Terry will have a balance owing of.
If you have provided an answer, you can:
Farah will receive a refund of.
If you have provided an answer, you can:
Farah will have a balance owing of.
If you have provided an answer, you can:
Chayton will receive a refund of.
If you have provided an answer, you can:
Chayton will have a balance owing of.
If you have provided an answer, you can:
Answer: Jonah will receive a refund of $2,138.80.
Answer: Terry will receive a refund of $225.00.
Answer: Farah will receive a refund of $1,600.00.
Answer: Chayton will receive a refund of $200.00.
of.
