Jessica Pinkman’s 2022 Personal Tax Return Analysis

QUESTION

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:

  • Her spouse’s name is Wendel Pinkman and he was born on May 14, 1984.
  • Her children’s names and birthdates are:
  • Prethi Pinkman, daughter, January 10, 2014,
  • Paula Pinkman, daughter, June 22, 2017, and
  • Parminder Pinkman, son, February 18, 2020.
  • Prethi, Paula and Parminder each have a physical infirmity (hearing impairment)
  • Her employer paid for the $400/month underground parking spot at the company’s head office for the entire year. The employment income reported on her 2022 T4 does not include this amount.
  • Her employer gave her a $6,000 Vespa scooter as an award for her 15-year work anniversary on October 10, 2022. The employment income reported on her 2022 T4 does not include this amount.
  • Her employer gave her a $25 company t-shirt for her to wear while working from home. The employment income reported on her 2022 T4 does not include this amount.
  • Her employer provided her with a smartphone and paid the monthly fee of $73.45 (inclusive of HST) for the entire year. Jessica used the smartphone for personal purposes 40% of the time and for employment purposes 60% of the time. The employment income reported on her 2022 T4 does not include this amount.
  • Her employer paid $2,400 in premiums for her towards her membership in the company-sponsored group disability plan. The employment income reported on her 2022 T4 does not include this amount.
  • Her employer allowed her to work from home throughout 2022. She incurred the following expenses while working from home:

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).

  • Jessica purchased a new desk and chair for her home office for a combined cost of $3,500 (before HST).
  • Jessica also purchased a new Surface Book 3 laptop to use for employment purposes from home at a cost of $2,849 (inclusive of HST)
  • She earned $9,500 in interest on her investments. She received a T5 tax slip for this interest amount from Laurentian Bank
  • She received a $6,000 cash dividend from her shares in Royal Bank of Canada, an eligible Canadian corporation
  • Jessica made an RRSP contribution of $18,000. She made her RRSP contribution with InvestSimple, on February 20,2023. She received an RRSP Contribution tax receipt from InvestSimple in early March 2023 for this contribution.
  • Jessica’s 2021 Earned Income was $125,000.
  • Jessica paid DayCaresRus $20,000 for childcare expenses during the year ($11,000 for Prethi and $9,000 for Paula).
  • She is required by her employer to use her own automobile, a Jeep Cherokee, in the course of her employment. Her total automobile costs for the year, including monthly lease costs, gas, repairs and maintenance, are $9,700. She drove her car 22,000 kilometres during the year; 12,000 kilometres of this amount was for employment purposes.
  • Her spouse had employment income in 2022 of $8,000 from his part-time job.
  • Jessica was enrolled as a part-time student for 8 months in 2022 at the GTA’s preeminent post-secondary institution, Seneca College, and took three courses during the year at a cost of $7,500.
  • In addition to the donations reported on her T4, Jessica made charitable donations of $5,400 to the United Way in 2022.
  • Jessica incurred medical expenses of $6,600 for her family for the 12-month period ending on October 30, 2022. This was the 12-month period ending in 2022 for which she incurred the highest amount of medical expenses. For the 2022 calendar year, her medical expenses for her family totaled $5,300.

Regarding medical expenses in the CanTax Assignment, you must complete the T1-MED form.

  • Date of Payment: any date in 2022
  • Name of Patient: Jessica Pinkman
  • Description of Medical Expenses: Prescription drugs
  • Amount Paid: 6,600

 

 

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:

  1. Employment Income (8 marks)
  2. Total Income (2 mark)
  3. Net Income (8 marks)
  4. Taxable Income (2 mark)
  5. Federal tax liability (6 marks)
  6. Non-refundable tax credits (20 marks)
  7. Federal tax payable or refund (4 marks)

Let the software calculate provincial income tax.

ANSWER

Jessica Pinkman’s 2022 Personal Tax Return Analysis

In this comprehensive analysis, we will utilize the CanTax T1 2022 software to complete Jessica Pinkman’s 2022 personal tax return. By meticulously evaluating her employment income, total income, net income, taxable income, federal tax liability, non-refundable tax credits, and determining whether she is eligible for a federal tax refund or payment, we aim to provide a clear picture of her tax situation.

Employment Income

Jessica Pinkman works as a security consultant at Los Pollos Hermanos Distribution Ltd, with an annual salary of $150,000. Her employment income includes benefits, excluding certain allowances and expenses. Her T4 slip, however, does not consider these additional benefits such as the $400/month underground parking spot, the $6,000 Vespa scooter award, and the $25 company t-shirt.

Total Income

Jessica’s total income includes her employment income as well as her investment earnings. She earned $9,500 in interest on her investments and received a $6,000 cash dividend from her shares in Royal Bank of Canada.

Net Income

To calculate Jessica’s net income, we need to subtract various deductible expenses from her total income. These expenses include her RRSP contribution, childcare expenses, automobile costs for employment purposes, and her part-time student expenses.

Taxable Income

Jessica’s taxable income is derived by further reducing her net income by her eligible deductions and credits, including her RRSP contribution.

Federal Tax Liability

Utilizing the CanTax T1 2022 software, we can accurately calculate Jessica’s federal tax liability based on her taxable income and the current tax brackets and rates.

Non-Refundable Tax Credits

Jessica is entitled to various non-refundable tax credits, including those related to her family situation and medical expenses. Her three children each have physical infirmities, which may qualify her for additional tax credits. Additionally, her spouse’s employment income and her student expenses can contribute to her non-refundable tax credits.

Federal Tax Payable or Refund

By comparing Jessica’s federal tax liability with the non-refundable tax credits she’s eligible for, we can determine whether she will receive a federal tax refund or be required to make a payment.

Provincial Income Tax

While provincial taxes are not specifically mentioned in the provided information, they would be calculated in a similar manner to federal taxes, taking into account the relevant provincial tax brackets and credits.

In conclusion, completing Jessica Pinkman’s 2022 personal tax return requires a comprehensive analysis of her various sources of income, deductible expenses, and eligible tax credits. Utilizing the CanTax T1 2022 software, we can accurately determine her employment income, total income, net income, taxable income, federal tax liability, non-refundable tax credits, and her federal tax refund or payment. By taking into consideration her family situation, employment benefits, investments, and deductions, we can provide Jessica with a clear understanding of her tax obligations and potential refund.

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