Q. I live on my own and have never filed a tax return. I finished college last year and moved into my own place. I started working the last three months of last year. Should I pay the cost of filing a tax return or not file? Am I required to file a tax return?
— Errol, Newmarket, ON

A. Contrary to thinking, not everyone has to file a tax return. You are required to file if:
• You owe income taxes
• Disposed of capital property
• Repay OAS or EI
• Earn more than $3,500 and must pay CPP
• Repay RRSP under Home Buyer’s Plan etc.

However, although you may not be required to file, low and middle income individuals should or lose out on many tax and government benefits such as, GST, Provincial credits, child tax benefits, housing rebates, working income tax benefits, RRSP room, tuition credits, etc.

You should file the prior years, as you may be missing out on cash.

Q. I started a new job and they have an employee stock option plan. Do I pay tax if I exercise option? When and how much?
— Derrick, Toronto, ON

A. Mr. Flaherty’s $53B deficit spring budget has introduced some changes to the existing rules for employee stock options.

The taxable employment benefit is the difference between what you paid (option price) and the fair market value.

Taxes would be deferred until the actual sale of the shares and allowed a 50 per cent deduction. The deferral came to a halt on March 4, 2010.

Some changes are:
• Elimination of the tax deferral. CRA does not want to wait for “their” tax
• Relief for tax deferral via a special election
• Employers must withhold and remit tax on the employment benefit
• Prevent the “double deduction” practice

Contact your tax advisor, as the rules can be complex.

– Henry Choo Chong, CGA, can be reached at choochonghcga@yahoo.ca and 416-485-5225.

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