Individual Tax Term Assignment and Grading

This assignment requires you write a case describing an individual tax situation, and manually complete a T1 General 2017 and all relevant provincial and federal tax schedules, reconcile your work, and write a summary letter to the individual. All necessary forms and information are available online at https://www.canada.ca/en/services/taxes/income-tax.html

1. Write a client case study. The written case description should cover all relevant information so that if I completed an income tax return based solely on the written information describing the case, I would be able to do it completely and correctly. This is likely to be approximately one – two full pages in length to provide the necessary information. As you complete the forms, you will find additional information is required, and you should add it to your case.

You must research applicable rules for all items you include in your case. Use the General Income Tax and Benefit Guide 2017 for every line number you use. Review the relevant guides and forms for each item you include.

Writing the case study shows that you understand verbal information as it relates to the income tax filing process, and can interpret forms and necessary detailed information.

Your case must include the following variables:

• All personal information required to complete the T1 General. The individual must be single with no children and born after 1960.
• Employment income (A) with payroll deductions CPP (B), EI (C), income tax (D), and pension adjustment (E).
• Interest income (F).
• Dividend income (G), also specify taxable amount and cash amount.
• Rental Income (H, I,  )
• Capital gain (K, L) - include a full description of the transaction leading to a capital gain.
• Donation (M).
• RRSP contribution (P). Show how you have calculated the maximum contribution limit by fully completing Chart 3 from the CRA publication T4040 2017 RRSPs and other registered plans. Chart 3 is on page 16-17 of T4040 (N, O).
• Medical expenses (Q).

• Fully complete all the relevant tax forms and schedules. Read the General Income Tax and Benefit Guide 2017 for each line number you use, and apply the information you find. Do additional research using CRA guides and forms where necessary. Make the CRA website your primary source of information. https://www.canada.ca/en/services/taxes/income-tax.html

Completing the tax forms shows that you are able to relate the verbal information to the forms, and apply all relevant rules to the situation by researching the information as necessary.

• Check your work using the Detailed Tax Calculator on www.taxtips.ca to calculate taxes owing. Note: Taxtips detailed tax calculator is not tax preparation software, and will require you to be knowledgeable about the items you input. For example, Taxtips calls for “capital gains” and automatically applies the 50% inclusion rate. The T1 General asks for “taxable capital gains” which you calculate on schedule 3. Similarly, Taxtips calls for “dividends” (eligible or other than eligible) and automatically grosses up to the taxable amount. The T1 general asks for “taxable dividends”, i.e. the grossed up amount, which you calculate. Also, some line items do not appear in Taxtips, and you must work around these items by including them in categories where they will have the same impact.  

Reconcile your manual answers with the Taxtips result. It should match perfectly right down to the refund/balance payable amount. If they do not agree, study them and find the source of your error.  Start by looking at total income. Then taxable income. Federal tax credits. Federal tax, etc. As you find discrepancies, correct your errors until the cases are reconciled.

Reconciling your work shows that you are able to logically find an error by comparing two forms, and use your knowledge of the income tax process to determine the error and correct it.

• Write a professional summary letter to the client. You must use a business letter format including addresses, date, salutation, introduction, body, summary and closing with signature.  For assistance, here is a link: https://www.nmu.edu/writingcenter/parts-business-letter

This letter does not have to be long (usually less than one page). Be brief, but summarize the tax situation for the year in a way that is relevant to the client. Include the following information:

• total income
  • taxable income
  • total tax payable
  • average tax rate
  • marginal tax rate, not including surtaxes
  • balance owing or refund
  • how much tax was saved as a result of the RRSP contribution
  • how much can be contributed to an RRSP in 2018
  • how much tax was saved as a result of the charitable contribution
  • how much tax was saved as a result of the medical expenses

Writing a summary letter shows that you can determine how tax information is relevant to the client’s situation, and communicate in a professional way.

Submit the following items:

1. Title page that includes appropriate information, your name, my name, and date.
2. Written case
3. All CRA PDF forms that are relevant to the case in a logical order. All forms must be completed in PDF – no handwritten forms.
4. Printed copy of the Taxtips case
5. Summary letter to client

Note: Submit the items neatly together. Use a staple or clip. Do not put the items in any kind of folder or envelope. I will deduct marks for any folders, plastic, envelopes or other containments.