You will become highly familiar with the T1 General tax returns as a professional accounting agency that offers tax preparation to Canadian clients. Most people working in Canada are required to submit T1 tax forms, so familiarity with them is crucial.
Starting off with client returns? Here’s what you need to know about preparing T1 general tax returns for your clients.
What is a T1 General Tax Return?
When filing personal income taxes with the Canada Revenue Agency (CRA), citizens of Canada use Form T1. It is often known as the Income Tax and Benefit Return. This tax return is a synopsis of the taxpayer’s financial information as reported on other returns. This is the case for federal, provincial, and territorial taxes, as well as income taxes, taxes on net income, taxes owed, tax deductions, tax credits, and other tax provisions.
For most Canadian residents, filing a T1 income tax return is mandatory. However, the tax documents required to show one’s income and tax situation to the CRA will vary depending on the province in which one resides and works. It also has an impact on the tax credits and deductions that a person is eligible for.
Who Needs to Fill a T1 General Tax Return?
The vast majority of your individual clients will require you to prepare and file a T1 General tax return. Filing a T1 for corporations or partnerships is not necessary because these types of organizations are obliged by law to file their taxes independently. Instead, businesses and their owners must fill out a T2 Corporation Return or a T5013 Partnership Return, depending on their legal structure.
A T1 General Return must be filed on behalf of all clients, whether they are corporation employees, independent contractors, or employers running a sole proprietorship or partnership.
Important Information You Need From Your Clients
The T1 General form is a streamlined alternative to Canada’s more intricate tax forms. Filling out special T1 paperwork is often unnecessary if you use professional tax software. It would be best if you had your client’s necessary tax documents on hand, as the T1 General Return is a synopsis of all the other tax forms.
Identification: Fill in your client’s information here, including name, address, SIN, and marital status. If you are filing as a sole proprietorship or partnership (such as a Realtor, Insurance Agent or Broker, Mortgage Broker, etc.), you must file an additional T2125 form if your client has more than one business.
Total income: This is where you must declare all your client’s revenue sources. These may include one or more income sources such as employment income, self-employment income, foreign income, disability payments, and so on.
Net Income: Following the mention of your client’s gross revenue, you must report the net income after deductions. You deduct all permitted expenses (such as RRSP Contribution, Child care expenses, Union dues, etc.) from your client’s gross income.
Taxable income: Taxable income is usually what remains after reducing Net income by losses carried forward from other years. Other deductions also apply in special cases. You can get the balances of losses from the CRA My account.
Refund or balance owing: If your client qualifies for a refund based on calculations, you may note it in this section. You enter a negative amount for refunds and a positive amount for the balance owed.
The T1 returns will be pre-populated with the required information once they are entered in the other returns.
Completing the T1 General Income Tax Return
If you want to claim tax breaks for your clients, you’ll need to fill out the appropriate Schedules for the T1 general return, which are detailed below.
- Schedule 2 – Federal Amounts Transferred By Your Spouse or Common-Law Partner
- Schedule 3 – Capital Gains (or Losses) for the Year
- Schedule 5 — Amounts for Spouse or Common-Law Partner and Dependents
- Schedule 6 – Canada Workers Benefit
- Schedule 7 – RRSP and PRPP Unused Contributions, Transfers, and HBP or LLP Activities
- Schedule 8 – Contributions and Overpayments to the Canada Pension Plan for the Year
- Schedule 9 – Contributions and Gifts
- Schedule 11 – Federal Amounts for Tuition, Books, and Education
- Schedule 13 – Employment Insurance Premiums on Earnings from Self-Employment and Other Eligible Earnings
- Schedule 14 – Climate Action Incentive
Federal Amounts Transferred By Your Spouse or Common-Law Partner
It may be necessary to inquire about the client’s spouse (or common-law partner) and whether or not the couple is married. As such, this Schedule 2 of the T1 form will determine the maximum amount and the federal and provincial amounts that a client can transfer to or from their spouse.
Therefore, you’ll need the spouse’s details to enter the correct information for your client. This entails the amount of your spouse’s or common-law partner’s taxable income, their adjusted taxable income, and any federal monies transferred to them (your client).
Remember that if your customer is qualified to receive a federal credit, they are also eligible to receive the comparable provincial credit.
Capital Gains (or losses) for the Year
Schedule 3 of T1 tax return reports on capital gain or loss for the year, such as from sale of property. Various forms of investment capital, such as stocks, bonds, property, artwork, and promissory notes, fall under this category. The gains or losses are calculated separately for personal property.
Amounts for the Spouse or Common-law Partner and Dependents
To claim a spousal amount on Schedule 5 of the T1 General, you must have the client’s marital information from Schedule 2. Only one spouse or common-law partner may claim the spousal amount, which is a non-refundable tax benefit that is reduced by the other’s earning income. The credit’s tax rate and the resident province both play a role in determining the final amount.
Lower-earning spouse is allowed to claim credit as the CRA sees the higher-earning one as the supporter. If a divorce, legal separation, or legal separation happens during the tax year, this will affect the calculations for the credit. Furthermore, the claimable spousal amount will change if your client has a non-resident spouse or common-law partner, regardless of whether or not they are financially supporting said, non-resident spouse or common-law partner.
It is easy to claim the Canada caregiver credit if either you or your client is providing care for a dependent spouse or common-law partner.
Canada Workers Benefit
Schedule 6 of Form T1 allows taxpayers with annual taxable incomes to claim the Canada Workers Benefit refundable tax credit. The annual income as well as the province or territory in which the client now resides will determine the amount of the Canada Workers Benefit (CWB) that they are eligible to receive.
Claim the Canada Workers Benefit in two parts:
$1,395 for single individuals
Those with an adjusted net income over $22,944 will see their payment amount decrease over time. If your clients adjusted net income is greater than $32,244, they will not be required to pay the basic amount.
$2,403 for families
If your client’s family’s adjusted net income is higher than $26,177, the amount that they get will gradually decrease. If they have a gross income adjusted for inflation that is higher than $42,197, they will not be eligible for a basic payment.
The maximum basic CWB amount that residents of Quebec are eligible for will be different.
If the client’s spouse or common-law partner is also eligible, both parties may be able to claim a disability supplement if they both qualify for the Disability Tax Credit.
$720 for single individuals
If your client’s adjusted net income is higher than $32,244, the CWB disability benefit will decrease over time. If the adjusted net income is beyond $37,044, your client will not receive a disability supplement.
$720 for families
The Canada Workers’ Compensation (CWB) disability benefit will be reduced over time if the adjusted family net income of the claimant is more than $42,197.
If the adjusted family net income is more than $46,997 and either of the spouses meets the requirements for the disability tax credit, or if they meet both of these requirements and the adjusted family net income is more than $51,797, then they will not receive a disability supplement payment.
However, if the client meets both of these requirements and the adjusted family net income is less than $46,997, then they will receive a payment.
The maximum amount of money that can be received as disability benefits in Quebec differs depending on the province.
RRSP and PRPP Unused Contributions, Transfers, and HBP or LLP Activities
Your client’s past unused contributions, current contributions, and plan transfers should all be reported on Schedule 7 of their T1 tax return. The client’s Notice of Assessment will reflect any unused RRSP contributions. There are six subsections in this section.
Part A includes all prior and current contributions:
Contributions to the RRSP from the previous year that were not included in the income tax return must be reported.
New contributions must be reported between the dates of March 2 and December 31 of the current tax year and between January 1 and March 1 of the following year (first 60 days from the next taxation year)
Part B includes Repayments under the HBP and the LLP:
This part is for taxpayers who withdrew cash from their RRSP to purchase a new house or pay for higher education. Totalize any required repayments to the HBP and LLP. These payments must be deducted from the total contributions before you can deduct the remainder of your contributions from your clients’ income. If you do not assign the funds to the HBP and LLP, the amount you must pay will be added to the online 12900 income and taxed.
Part C includes RRSP deductions:
The Notice of Assessment will tell you the maximum amount you can deduct.
If your employer offers a PRPP, please let them know about the participation. As a result, the total allowable deductions will be lower.
Do not forget to document any external account transfers. Those transfers pertain to money that was moved into a registered retirement savings plan (RRSP) from a registered retirement income fund (RRIF), a qualified pension plan (QPP), or a supplemental retirement allowance (SRA). This amount will not count toward your deduction cap.
Figure out how much of the remaining payments from Part B you want to deduct and how much you want to carry forward. Line 20800 of the Income Tax and Benefits return is where you should enter the amount you desire to deduct.
Part D records the part of your contributions you will carry forward to next year:
From Part C, determine the balance of your client’s contributions that you wish to carry forward to the following years.
Part E includes new withdrawals from your RRSP under the HBP and LLP:
- Report the amount of HBP and LLP you withdrew during the taxation year
- Tick the box that corresponds to the T4RSP slip you have received for these withdrawals
Part F includes contributions to amateur athlete trusts:
If your client is an amateur athlete and they have earned money from their performances, you can put that money into a tax-free account. Since this is considered earned income and counts toward the deduction cap, it must be reported.
Canada Pension Plan Contributions and Overpayment for the Year
Schedule 8 of Form T1 must be completed by taxpayers who overpay their CPP, QPP, or EI contributions for the year, typically due to a change in employment status or starting a new job during the tax year. Make sure you know about any changes in job status that may affect your client.
Schedule 8 is not needed to determine the client’s CPP or QPP contribution unless the following conditions are met:
They have only ever made contributions to QPP while living in Quebec.
They have only been making CPP contributions while living in another province or territory.
Donations and Gifts
Add up all the gifts that your client, their spouse, or common-law partner made in the relevant tax year on Schedule 9, Donations and Gifts, and any donations made in the prior five years but not claimed.
Federal Tuition, Education, and Textbook Amounts
Clients can claim these credits on Schedule 11 of their federal income tax filings. Federal, provincial, and territory governments all honour this credit. The credits and their related values will thus vary from one province to the next.
Employment Insurance Premiums on Other Eligible Earnings and Self-Employment
Your self-employed clients need to fill out Schedule 13 of the T1 form. Inform customer about EI special benefits program, and report net income from self-employment and partnership on tax return if applicable.
The T2125 tax form, also known as the Statement of Business or Professional Activities, is an integral part of the T1 return for self-employed individuals. Therefore, it is crucial to have complete information on the client’s commercial and professional income sources.
Climate Action Incentive (CAI)
CAI refundable tax credit is calculated on Schedule 14 of the T1 return. However, only Alberta, Manitoba, Ontario, and Saskatchewan enable residents to claim this credit.
Clients who live in these four provinces and meet any of the other conditions below are eligible for the rebate.
Are 18 years or older
Have a spouse or common-law partner
Are a parent living with their child
Reasons to Make T1 Adjustments
If a client asks or requires you to revise their income tax returns for the current tax year, you may also be asked to submit a T1 Adjustment Request on their behalf. You can file amended tax returns with the CRA for up to the last ten years.
Your client should wait to file a T1 Adjustment Request or make any adjustments after receiving their Notice of Assessment.
T1 Tax Filing Deadline
The T1 General must be filed by April 30th of the year after the tax year to which it pertains. Additionally, self-employed people and their spouses or common-law partners who have business expenses related to tax shelter investments must file their returns by April 30th. These individuals are also subject to the April 30th payment deadline.
Unless an extension is granted, self-employed people and their spouses or common-law partners must submit their income tax returns by June 15th. Also, they should make any necessary payments by April 30th.
At tax time, having the right resources can make all the difference. Using professional tax preparation software can save time, reduce errors, and avoid EFILE submission delays.
Pro Tax streamlines the process of submitting T1 returns for your clients and eliminates the need to switch between forms to enter data. Pro-Tax streamlines the review and EFILE process with features like CRA auto-fill my return and an in-built Auditor.
Quickly and easily submit T1 returns for clients with the help of the cloud-based professional tax software found in QuickBooks Online Accountant. Get in touch with Unison Globus’s certified experts immediately for further details. Call us at no cost to arrange a meeting.
What is the difference between the t1 general and the t4 tax return?
Although the two types offer comparable information, they are utilized differently. The T1 is a form that needs to be filled out by employees and business owners. Then sent to the Canada Revenue Agency. On the other side, employers are the ones who are responsible for filling out the T4 form and giving it to their employees.
What is my t1 general?
Canadians’ tax filings are easier with the new form. The T1 General form is used to file annual income tax returns with the CRA (Canada Revenue Agency). It is used by sole proprietors, partners, and other business owners to declare yearly earnings.
What are a t1 general tax return and notice of assessment (NOA)?
The Canada Revenue Agency issues a two-page document called a Notice of Assessment (CRA). At the end of each tax year, it will be sent to every Canadian taxpayer. Taxpayers in Canada can use the document to determine their exact income tax liability to the Canada Revenue Agency. As a CPA, you can check how much tax your client has previously paid, if any tax deductions have been made, and how much of a tax refund or credit you may be owed.
The assessment notice is divided into numerous parts. Reports of your client’s tax returns, both as filed and as amended and reassessed
- Evaluation of Taxes: A Synopsis
- Information regarding any corrections or alterations the CRA has made to your client’s tax return.
- Your client’s Registered Retirement Savings Plan Deduction Cap Statement
The Canada Revenue Agency won’t issue the Notice of Assessment until you file your client’s T1 General tax return.
Every Canadian has probably seen this form. Customers must complete and submit this individual tax return form.
This document, which is usually no more than four pages long, requires your broker to submit a mortgage application on your behalf.
It’s a rundown of your client’s payments to the Canada Revenue Agency for income tax. Every single Canadian is required to fill out this form annually. This form may have varying requirements depending on the province or territory of residence throughout the tax year.
Your client’s T1 General requires information on the following:
- Employment or self-employment income obtained during the preceding year
- Benefit income
- Any benefits received, including COVID-19 benefits, are taxable.
- Income from Investments and many more
T1 General forms can be filled out by the client, accountant, or CPA firm on their behalf.
What is included in a t1 general?
The T1 general is a form that calculates the taxpayer’s refund or owed amount based on their income, deductions, and tax payments using supporting forms and schedules, and has five sections: identification, total income, net income, taxable income and refund or amount owed.