Jessica Pinkman is 42 years old. She was born on March 1, 1980. She is married and has 3 children aged 2, 5 and 8 years old. She is employed as a security consultant at Los Pollos Hermanos Distribution Ltd and has an annual salary of $150,000. Her 2022 T4 is provided below.
She has asked you whether she will have a federal income tax payable or refund for 2022 (let the software calculate the provincial taxes).
Other information she shared with you is as follows:
o Utilities $2,800
o Repairs and maintenance (roof repair) $8,000
o Property taxes $8,200
o House insurance $2,400
o Interest on mortgage $15,000
o Repainting of her home office $650
o Home internet service fees $1,080
o Long distance telephone charges (100% work related) $320
· Jessica’s home has 2,400 square feet of living space. She uses 240 square feet for her work space in the home.
· Jessica’s work space at home is used exclusively for the purpose of carrying out her employment duties and is used on a regular and continuous basis for meeting clients of Los Pollos (through MS Teams).
Regarding medical expenses in the CanTax Assignment, you must complete the T1-MED form.
REQUIRED: Use CanTax T1 2022 software to complete Jessica Pinkman’s 2022 personal tax return. The return you submit should include balances on all relevant lines and forms required to determine Jessica’s:
Let the software calculate provincial income tax.
In this analysis, we will complete Jessica Pinkman’s 2022 personal tax return using the CanTax T1 2022 software. We will consider various components of her income, deductions, expenses, and tax credits to determine her employment income, total income, net income, taxable income, federal tax liability, non-refundable tax credits, and whether she will have a federal tax payable or refund. Please note that provincial income tax calculations will be handled by the software.
Employment Income: Jessica’s employment income from Los Pollos Hermanos Distribution Ltd is reported as $150,000 on her 2022 T4. This is her main source of income.
Other Income: Jessica earned $9,500 in interest on her investments and received a $6,000 cash dividend from her shares in Royal Bank of Canada. These amounts contribute to her total income.
Deductions and Expenses
Childcare Expenses: Jessica paid $20,000 to DayCaresRus for childcare expenses.
Automobile Costs: Her total automobile costs were $9,700, and she drove 12,000 kilometers for employment purposes.
Home Office Expenses: Jessica incurred various expenses for her home office, including utilities, repairs, property taxes, house insurance, mortgage interest, repainting, internet service fees, and telephone charges. Her home office space is exclusively used for work.
Educational Expenses: Jessica spent $7,500 on education at Seneca College.
Medical Expenses: Jessica incurred medical expenses of $6,600, and her family’s total medical expenses for the year were $5,300.
Tax Credits
Children’s Infirmity Tax Credit: Jessica’s three children have a physical infirmity, which makes her eligible for this tax credit.
RRSP Contribution: Jessica contributed $18,000 to her RRSP.
Charitable Donations: Jessica made charitable donations of $5,400.
Interest and Dividend Tax Credits: Jessica earned interest on her investments and received a dividend, which will impact her tax credits.
Calculations
Total Income: Employment income + Other income = $150,000 + $9,500 + $6,000 = $165,500
Net Income: Total income – Deductions and expenses = $165,500 – ($20,000 + $9,700 + Home office expenses + $7,500 + $6,600) = Net Income
Taxable Income: Net income – Tax credits = Taxable Income
Federal Tax Liability: Using the taxable income, we can calculate the federal tax liability based on the current tax brackets and rates.
Non-refundable Tax Credits: We will calculate the various non-refundable tax credits Jessica is eligible for, including the children’s infirmity tax credit, RRSP contribution credit, charitable donation credit, interest and dividend tax credits, and any other applicable credits.
Federal Tax Payable or Refund: The federal tax payable or refund will be determined by comparing the federal tax liability with the total of non-refundable tax credits.
In conclusion, Jessica Pinkman’s 2022 personal tax return involves detailed calculations of her employment income, total income, net income, taxable income, federal tax liability, non-refundable tax credits, and whether she will have a federal tax payable or refund. The CanTax T1 2022 software will assist in accurately computing these values. Please note that provincial income tax calculations are not included in this analysis but will be handled by the software.
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