As a professional accounting service offering tax preparation to your Canadian clients, you are sure to become very familiar with the T1 General tax returns. The T1 returns must be filed by most individuals living and working in Canada, making it a must-know for your practice.
If you are just starting out with your client returns, here is what you need to know about the tax preparation of your client’s T1 returns.
What is a T1?
The T1 General Return, also known as the Income Tax and Benefit Return, allows Canadians to file their personal income taxes with the Canada Revenue Agency (CRA). This tax form is a summary of the individual’s personal financial information set out in the various other tax forms filed with the CRA. This includes income taxes, provincial and territorial taxes, net income, taxes payable, deductions, credits, and more.
Most individuals living in Canada will need to complete a T1 income tax return. However, what province the individual resides and works in will affect the tax forms needed to prove their income and tax situation to the CRA. It also affects what deductions and credits the individual can claim.
Who Needs to Fill a T1?
You will need to fill in and file a T1 General tax return for almost all of your individual clients. Separate legal entities that are required to file separate filings like corporations, or partnerships, are not required to file a T1 return. Instead, corporate clients will need to file a T2 Corporate Return and partnerships need to file a T5013 Partnership Return.
Whether your clients are employees of a company, self-employed, or are an employer who operates a business structured as a sole proprietorship or partnership, you will need to file a T1 General Return.
How to Get T1 General?
Head to the Canada Revenue Agency website, where you can find the T1 General Return Package for each of your clients. You will need to choose the province in which the client resided in for that tax year. The T1 package consists of all federal and provincial income return forms that must be filed for each of your un-incorporated clients.
What Information Do You Need From Your Clients
Because the T1 General Return is a summary of all other tax forms, you will need your client’s relevant forms with you. If using professional tax software, typically you will not need to fill in specific T1 forms. When the information is entered in the other required returns it will automatically populate the T1 returns with the necessary data.
Completing the T1 General Income Tax Return
The sections listed below are the relevant Schedules for the T1 general return that will allow you to claim certain tax benefits for your clients.
- Schedule 2 – Federal Amounts Transferred From 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 Dependants
- Schedule 6 – Canada Workers Benefit
- Schedule 7 – RRSP and PRPP Unused Contributions, Transfers, and HBP or LLP Activities
- Schedule 8 – Canada Pension Plan Contributions and Overpayment for the year
- Schedule 9 – Donations and Gifts
- Schedule 11 – Federal Tuition, Education, and Textbook Amounts
- Schedule 13 – Employment Insurance Premiums on Self-Employment and Other Eligible Earnings
- Schedule 14 – Climate Action Incentive
Federal amounts transferred from your spouse or common-law partner
Whether or not your client is married, and if that spouse (or common-law partner) is also a client, you might need to seek out relevant information. This will dictate how much and which federal and provincial amounts clients can transfer to or from their return to their spouses in this Schedule 2 of the T1 form.
Therefore, you will need your client’s spouse’s information to accurately enter the relevant data. This includes the spouse’s or common-law partner’s taxable income amount, adjusted taxable income, and federal amounts transferred from their spouse or common-law partner (your client).
It is important to note that If your client is eligible to claim a federal amount, they are also entitled to claim the corresponding provincial credit amount.
Capital Gains (or losses) for the year
Schedule 3 of the T1 return cover’s your client’s capital gain or loss for the year, meaning any gains or losses resulting from their sale of the property. This includes stocks, bonds, real estate, art, or promissory notes. Depending on the item sold, it is categorized as personal-use property, or listed personal property, which is calculated separately from other gains or losses of your client’s capital assets.
Amounts for spouse or common-law partner and dependants
With the client’s spousal information in hand from Schedule 2, you can claim a spousal amount for them in Schedule 5 of the T1 General. This spousal amount is a non-refundable tax credit, which is reduced by income earned by the spouse/ common-law partner and can be claimed by only one of the spouses or common-law partners. The amount is also dictated by the province in which they live and the tax rates of the credit.
The CRA allows the lower-paid spouse to claim this credit as they consider the higher-income spouse or partner to be supporting the lower-income spouse.
Separation or divorce and involuntary separation within the same tax year the returns are filed will altar these amounts and calculations. At the same time, non-resident spouses and common-law partners that are non-residents of Canada – whether supported by your client or not- will also affect the claimable spousal amount.
If your client or the client’s spouse or common-law partner is dependent on the other and is their caregiver, you can claim the Canada caregiver credit.
Canada Workers Benefit
If an individual earns a low taxable income between $3,000 and $24,112 annually, they can claim the Canada Workers Benefit refundable tax credit in Schedule 6 of the T1 tax form. This credit also applies to families earning a household income of $36,482 or less.
This Canada Workers Benefit can be claimed in two parts:
- A basic amount: This is calculated using the client’s household income, marital status, and age of their children. Only one person per family can claim this benefit.
- A disability supplement: If the client’s spouse or common-law partner is eligible for the benefit too, then both parties may be able to claim a disability supplement if they are both eligible for the Disability Tax Credit.
That being said, only certain Canadians are eligible for this tax credit. On top of the maximum income amounts, they must also be a permanent resident of Canada and are 19 years or older by the end of the current tax year. However, in certain situations, spouses and common-law partners, and dependents can also claim this credit.
RRSP and PRPP Unused Contributions, Transfers, and HBP or LLP Activities
Schedule 7 of the T1 tax form is where you will report your client’s prior unused contributions, current contributions, and any transfers to or from the plan. Any unused RRSP contributions will appear on the client’s Notice of Assessment form. This section is divided into six parts:
- Prior and current contributions
- Repayments under the Home Buyer Plan (HBP) and the Lifelong Learning Plan (LLP)
- RRSP deductions
- Contributions to carry forward to next year
- New withdrawals from the RRSP under the HBP and LLP
- Contributions to amateur athlete trusts
Canada Pension Plan Contributions and Overpayment for the year
Schedule 8 of the T1 form is used when the individual has overpaid their contributions to the Canada Pension Plan (CPP), Quebec Pension Plan (QPP), or Employment Insurance (EI) during the year. Typically this happens when the person has changed jobs or started a new job halfway through the tax year. Ensure your client has informed you of any changes in their employment for this reason.
Therefore Schedule 8 is only completed to calculate the client’s CPP or QPP contribution if:
- They are a resident of Quebec and only contributed to QPP
- They are a resident of another province or territory and have only contributed to CPP
Donations and Gifts
Schedule 9, Donations and Gifts, is where you will add up all of the eligible donations either your client or their spouse or common-law partner made in the tax year in question, as well as any donations in the previous five years that were never claimed.
Federal Tuition, Education, and Textbook Amounts
Schedule 11 of the client income tax returns cover non-refundable tax credits for educational expenses. The credit can be claimed on a federal level, as well as a provincial or territorial level. Therefore, the credits and corresponding amounts will change depending on the client’s province of residence.
Employment Insurance Premiums on Self-Employment and Other Eligible Earnings
Schedule 13 of the T1 form applies to your self-employed clients. Discuss with your client to see whether or not they choose to participate in the Employment Insurance (EI) special benefits program through the CRA. Any clients that were self-employed, and were or still are a member of a partnership during the tax year, you will need to enter in their net income from their business and professional activities in this section.
An essential part of the T1 return for self-employed individuals is the T2125 tax form, the Statement of Business or Professional Activities. So having all relevant information pertaining to the client’s business and professional income generation is a must.
Climate Action Incentive
Schedule 14 of the T1 return is where you will calculate the Climate Action Incentive (CAI) refundable tax credit for your clients. That being said, only specific provinces allow this credit to be claimed, including Alberta, Manitoba, Ontario, and Saskatchewan.
Clients that are residents of these four provinces are eligible for the credit if they also meet any one of the following criteria:
- Are 18 years or older
- Have a spouse or common-law partner
- Are a parent living with their child
Why T1 Adjustments Are Made
Clients may not only want or need you to file their income returns for the current tax year in question, but they may also need you to file a T1 Adjustment Request. The CRA allows individuals to adjust their returns going back up to 10 years.
It is best practice to wait until your client has received their Notice of Assessment before asking for any changes or submitting a T1 Adjustment Request.
Learn more about helping your clients through the 2021 tax filing season.
T1 Tax Filing Deadline
The tax filing deadline for the T1 General is April 30th in the following year in which the tax returns apply. Self-employed individuals, and their spouse or common-law partner, with business expenditures relating to tax shelter investments, must file on April 30th as well. These persons must also meet the payment deadlines of the same date, April 30th.
Otherwise, self-employed individuals and their spouse or common-law partner will need to file their income tax returns by June 15th and meet payment deadlines of April 30th.
Filing T1 Form Online Using Software
The right tools can make all the difference come tax time. Professional tax preparation software can make you more efficient, improve accuracy and prevent EFILE delays. Pro Tax, our cloud-based tax software, is built into QuickBooks Online Accountant, so you can file T1 returns from the same place you manage the books.
Pro Tax has built-in features like T1 Express Data entry that makes filing T1 returns for your clients fast by pulling all your most-used tax fields in one worksheet, so you don’t have to jump between forms to input information. Plus with CRA auto-fill my return and a built-in Auditor, Pro-Tax makes the review and EFILE process easy.
With QuickBooks Online Accountant’s cloud-based professional tax software, you can file client T1 returns faster than ever. Try it for free.
This content is for educational and information purposes only and should not be considered legal, accounting or tax advice, or a substitute for obtaining such advice specific to your business. Tax laws and regulations change frequently and can vary widely based upon the specific facts and circumstances involved. The content on this site is “as is” and carries no warranties. Intuit does not warrant or guarantee the accuracy, reliability, and completeness of the content on this site. We provide third-party links as a convenience and for informational purposes only. Intuit accepts no responsibility for the accuracy, legality, or content on these sites.