Exercise - Calculate a refund or a balance owing - Learn about your taxes
Learn about your taxes
Exercise – Calculate a refund or a balance owing
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
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
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.
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.
Note: Before you proceed
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
Social Insurance Number
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
Enter income
Plus additional income
Equals the total 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
Enter the total income
from Step 2
Minus the total deductions
for calculating net income
Equals the 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.
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:
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 thetaxable incomefrom Step 4
Enter the taxable incomefrom Step 4 (Answer)
Enter the taxable incomefrom 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)
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 taxafter multiplying by the federal tax rate
equals
equals
equals
equals
Equals taxafter multiplying by the federal tax (Answer)
Equals taxafter multiplying by the federal tax (Answer)
Add federal tax calculated on incomein the lower tax brackets
plus 0.00
plus 4,999.90
plus 14,999.70
plus 29,999.40
Equalsfederal tax on taxable income
equals
equals
equals
equals
Equalsfederal tax on taxable income (Answer)
Equalsfederal 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
Enter the federal non-refundable tax credits
Multiply by the federal non-refundable tax credit rate Multiply by 0.10
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.)
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
Enter the federal tax
from Step 5
Plus the provincial
or territorial tax
Equals the total payable
Enter the tax deducted at source
Plus the eligible refundable tax credits
Equals the total credits
Enter the total payable
Minus the total 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.
