At some point in most people’s lives, they will owe income taxes. Listed below are some situations that may result in you having to pay additional income tax. General
- Loss of dependant claim for lower income spouse due to separation.
- Loss of dependant claim for child due to income earned by your child exceeding the 2019 $12,069 limit or your child is now over age 18.
- Change in marital status resulting in change in total family income.
- Withdrawal of RRSP.
- Lump sum payment received (eg. disability claim, retroactive payments, etc.).
- Pension income from prior employer and federal government.
- Working while drawing pension
Employee. Your employer deducts income tax based on the TD1 Personal Tax Credits form you complete. The following situations may result in additional taxes owing.
- Failure to update your employer for change in the personal tax credits you can claim.
- Employer payroll or software error.
- More than one employer.
- Employment insurance or wage loss replacement earnings.
- Investment income where taxes may not be deducted (eg. dividends, interest, etc.)
- Working while drawing pension
Self-Employed. Self-employed individuals are responsible for remitting their own income tax, employment insurance (if elect to participate), CPP and GST. Most self-employed individuals will owe taxes.
- CPP is payable at 10.2% of your net self-employed income over $3,500.
- Income tax is payable on your net self-employed income over your personal exemptions ($12,069 for the basic personal exemption).
- GST is payable and you must register if your business(es) earn in total $30,000 gross at any point in the calendar year.
If you have tax software, you can input your estimated income into the software to calculate taxes payable. Alternatively, if your situation is more complex or you don’t feel comfortable using tax software, you may wish to consult with an accountant that specializes in income taxes. We refer you to our next blog if you are unable to pay the full amount. Submitted by, Debora Kwasnicky, LIT (Kwasnicky & Associates Inc)