STEP 5 - SUMMARY OF TAX AND CREDITS LINE 400 - TAXABLE INCOME There are two ways you can calculate your taxes: using the Tables or Schedule 1 - Detailed Tax Calculation. You may be able to use the Tables at the back of the schedules to determine your total tax. Read the guidelines at the beginning of the Tables to find out if they apply to you. . If you are able to use the Tables, follow the instructions just before them. . If you are not able to use the Tables, you must complete Schedule 1. See the "Schedule 1 - Detailed Tax Calculation" section after lines 484 and 485 in this Guide for details. MINIMUM TAX The following will explain if minimum tax applies to you and whether you will need to complete Form T691, Calculation of Minimum Tax. If minimum tax does not apply to you, follow the instructions for line 400. Minimum tax applies to those people at a certain income level. It is intended to limit the tax advantage these people may receive in a year from certain incentives. You must pay minimum tax if it is greater than the federal tax calculated in the normal manner. There is a basic exempt amount of $40,000 allowed in calculating taxable income for this tax. Minimum tax does not apply to people who died in the year. You may have to pay minimum tax if any of the following situations apply to you. 1. You reported taxable dividends on line 120. 2. You claimed any of the following tax credits in the year: . an investment tax credit, . an overseas employment tax credit, . a federal political contribution tax credit, or . a labour-sponsored funds tax credit. 3. You reported a taxable capital gain on line 127. Capital gains from foreclosing or disposing of "eligible capital property" are not subject to minimum tax. 4. You claimed any of the following: (a) a deduction for transferring retiring allowances to a registered retirement savings plan or registered pension plan; (b) a deduction for the transfer of periodic registered pension or deferred profit sharing plan payments to a spousal registered retirement savings plan; (c) a loss resulting from or increased by claiming capital cost allowance on the rental of multiple unit residential buildings in Canada (including furniture, fixtures and equipment), or certified films and videotapes. This also includes your share of a partnership loss; (d) a loss from resource properties, resulting from or increased by claiming a depletion allowance, or exploration, development or Canadian oil and gas property expenses as resource expenses; (e) an employee stock option and shares deductions at line 249; or (f) an employee home relocation loan deduction. YOU WERE ASKING ...? Q. I received $400 of taxable dividends in 1993. Does this mean I have to pay minimum tax? A. If this is the only type of the previously listed income that you have, you will probably not have to pay minimum tax. There is a basic exempt amount of $40,000 allowed in calculating taxable income for this tax. You should use Form T691, Calculation of Minimum Tax, to calculate if you have to pay minimum tax. However, in most cases, if you do the following calculation and the result is less than your regular federal tax, you will not have to pay the tax. If the result of this calculation is more than the federal tax you would normally pay on your taxable income, you will have to get and complete Form T691. Calculation - Add the following amounts to your taxable income at line 260: . line 207 - registered pension plan contributions, . line 208 - RRSP contributions, . the losses previously described in 4(c), . the losses previously described in 4(d), . one-quarter (1/4) of line 539 on Schedule 3, Total Capital Gains . line 248 - employee home relocation loan deduction, and . line 249 - stock option and shares deductions. Then subtract from that total . one-fifth (1/5) of the dividends reported on line 120, . one-third (1/3) of allowable business investment losses on line 217, and . $40,000. Multiply the excess by 17%. From that figure subtract 17% of the following amounts: . lines 300 to 305 - personal amounts, . lines 308 and line 310 - Canada or Quebec Pension Plan contributions, . line 312 - Unemployment Insurance premiums, . line 316 - disability amount for self, . line 320 - tuition fees for self . line 322 - education amount for self . line 332 - medical expenses, and . line 344 - charitable donations (if your total donations are more than $250, claim 17% on the first $250 and 29% on the rest.) NOTE: If you paid minimum tax for 1986, 1987, 1988 or 1989 but do not have to pay minimum tax for 1993, you may be able to apply the minimum tax you paid in those years against your 1993 taxes. See line 504 for details. NOW THAT YOU HAVE COMPLETED YOUR RETURN ASSESSMENT OF YOUR RETURN Once we process your return, you will receive a "Notice of Assessment." The Notice will either confirm that your calculations were correct or explain any changes that were made. . If you are entitled to a refund, a cheque will be sent to you at the same time as your Notice. . If you owe money from a previous year, your refund will be reduced by the amount you owe. Please follow the instructions on the back of the Notice of Assessment if you disagree with the Assessment or would like a further explanation. CHANGING YOUR RETURN AFTER YOU MAIL IT After mailing your return, you may . receive additional information slips that should have been filed with your return, . want to make a correction, or . want to make an additional claim. You may request changes to your tax return within three years from the date your return was first assessed. However, for certain deductions, such as loss carry-back, you may request changes within six years from the date your return was first assessed. If a change is needed, do not file another return. Include all the details, your social insurance number and the taxation year(s) you want adjusted in your letter. Your Notice of Reassessment will show any changes. If your request will not result in a reassessment, we will tell you why. NOTE: It usually takes eight weeks before a Notice of Reassessment is mailed to you. If you have not received your Notice of Assessment - If you live in an area served by the Ottawa, Toronto, Scarborough, Mississauga or North York district offices, write a letter to the: Taxation Centre, Ottawa, Ontario K1A 1A2 If you live anywhere else in Ontario, write to the: Taxation Centre, Sudbury, Ontario P3A 5C1. If we receive your request before your return is assessed, the information will be considered when your return is assessed. This may cause a slight delay in processing your return. If you have already received your Notice of Assessment - If you live in an area served by the Ottawa, Toronto, Scarborough, Mississauga or North York district offices, write a letter to your district office. The address is shown at the end of this Guide. If you live anywhere else in Ontario, write to the Taxation Centre, Sudbury, Ontario P3A 5C1. CHANGING YOUR NAME OR ADDRESS AFTER YOU FILE If you change your name or move after you file your return, please let us know in writing as soon as possible so that we may send you . your Notice of Assessment and any refund you are entitled to without delay, . your tax return package for next year, . if you qualify, an advance payment of your child tax credit, which is paid in the fall, . if you qualify, your goods and services tax credit, and . if you qualify, your RRSP Room Statement. Send a signed letter with your new name or address, to the taxation centre where you sent your return. Refer to "Changing your return after you mail it" for the address of your taxation centre. Be sure to put your social insurance number on your letter. If you are writing for other members of your family, you must also include their social insurance numbers. In addition, each of them must sign the letter authorizing the change to their records. MATCHING, POST-ASSESSMENT REVIEWS AND AUDITS Only a limited review of your return is done when it is first assessed. The Notice of Assessment is based on that limited review. There are three main types of review done after a return is assessed: . Matching is done to verify that the correct income has been reported. We match information slips (such as a T4 or T5) with your social insurance number. For example, we may check to ensure you have reported all your employment income or investment income. . Post-assessment reviews are done to verify expenses, deductions and credits. For example, we may ask you to provide receipts supporting your deduction for child care expenses. You must keep your supporting documents in case your return is selected for review. . Audits are usually done on a selection of returns that declare income from business and property. For details, get Information Circular 71-14R4, The Tax Audit. You may also wish to read Information Circular 78-10R2, Books and Records Retention/Destruction, which describes the books and records you must keep. In some cases, we may review more than one of your returns at the same time. Generally, we will make any necessary adjustments to your return(s) within three years of the original assessment date(s). IMPROVING THE GUIDE This Guide is reviewed each year. If you have any comments or suggestions to improve the explanations provided in this Guide, we would like to hear from you. Please forward your comments to: Tax Forms Directorate 875 Heron Road Ottawa, Ontario K1A 0L8