TaxPrep Instructional Assignment 2
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TaxPrep Assignment 2
You can start with the version of your TaxPrep Assignment 1 up to the point where all Character 1 and Character 2’s personal information was inputted (top of page 3 from TaxPrep Assignment 1, where the red font says “save your return at this point”). If you did not save at this point, you can either take a copy of your Assignment 1 and delete everything entered in the T4, child care and RRSP sections, OR redo the instructions, below in italics:
Assignment 1 pre-instructions:
1.
Follow the download instructions on the syllabus. I have also posted them below:
Download the T1 TaxPrep software at https://www.taxprep.com/en/index.asp
. Click “downloads” on the top menu, and log in with WK699477
, password ACTG4P412020. Once logged in, click “download” on the left menu, and go to the file centre, where you can download Personal Taxprep Classic to your device.
2.
It may also ask you to “register your taxprep”. If it does, just answer the registration questions as
best you can (i.e. you can put ‘Brock’ as the business, etc.) and it should let you continue (it only takes a few minutes). 3.
Remember, TaxPrep is not compatible with Mac computers so you will need to use a PC. If you do
not have a PC, TaxPrep is downloaded on the 11 computers in the Computer Commons closest to the clear training room at the back, so you can use those. There is an announcement on Sakai that lists which computer numbers have TaxPrep in the fishbowl. 4.
Open a new document (file
new)
5.
Go to the “ID” form (jumpcode “ID”)
6.
Under the identification- taxpayer heading:
a.
Type the full name of a fictitious Character of your choosing (herein Character 1). b.
Type the social insurance number “999999999”. A dialogue box will pop up to say that this is not a valid social insurance number- that is okay since we don’t want to use a real social insurance number in a fictious situation for personal security reasons. c.
For the birth day spot, put the birth year 1973, and any month and day of your choice. d.
Change the marital status on December 31 to “married”. 7.
Under the heading “coupling”, tick the box “the taxpayer’s and the spouse’s returns are prepared
together”. a.
A dialogue box will pop up. Select “new return” and “OK”. This will create an attached return for Character 2. 8.
Under the ‘mailing address” section, type in a fictitious mailing address number, street, city, and
postal code. USE ONTARIO FOR THE PROVINCE.
9.
There will be a number of questions here that we are going to answer the same as a class for consistency, though the actual answers would otherwise vary person by person. You can just answer as instructed, to keep it consistent. 10.
Under the “principal residence” section, for the questions:
a.
“The taxpayer disposed of a principal residence in the current taxation year for which he or she claims the total or partial exemption”
select “No” by double clicking the No box
b.
“The taxpayer disposed of a principal residence after the end of the taxation year
select “No” by double clicking the No box
c.
Did the taxpayer stop living in the principal residence to rent it…
No
d.
“Has the taxpayer’s mailing address changed form the previous taxation year”
Select Yes (above “principal residence heading”)
11.
Under the telephone section, type “667 888 8888” for the home number. You can leave the other
numbers blank 12.
Under the CRA online mail section:
a.
For “the taxpayer authorizes the registration for the CRA online mail service”
click “already registered” (assumption)
13.
Under the “
residence
” section, for province or territory of residence on December 31, 2019, choose “Ontario” in the dropdown menu. 14.
Scroll down on the ID page to the “Identification- Spouse” section. a.
In the First name/ last name spots, type in the name of a fictitious Character to be the spouse of Character 1 (herein “Character 2”). b.
Use the social insurance number 999999998
c.
Type in any birthday that is in the 1970s. 15.
Scroll down to the “elections Canada section” under “Other Information” heading
a.
Is the taxpayer a Canadian citizen
type “Yes”
b.
“As a Canadian citizen, does the taxpayer authorize the CRA to provide his/her name, address, date of birth, and citizenship to Elections Canada to update his/her information on the National Register of Electors?”
Yes
16.
T1135 section
a.
Foreign income: did the taxpayer own or hold foreign property at any time in 2019 with a total cost of more than CAN $100,000?--> No
17.
In the top toolbar, go the button that looks like a doctor’s stethoscope. You can choose to either “dock” or “float”. a.
This will bring up all the return “diagnostics” which will alert the preparer to anything that is wrong with the return. Some diagnostics we will ignore for now; they are just giving us additional information
b.
For diagnostic:
i.
M254- Schedule 14- verify and indicate if the taxpayer was living in a small or rural community on December 31. Double click this diagnostic line item, and it will take you to schedule 14 to the part where the diagnostic is discussing
1.
Under the “Supplement for residents of small and rural communities” on
schedule 14:
a.
“The taxpayer resided outside of a census metropolitan area on December 31, 2019”
Select No (this should make the diagnostic go away/it will clear the diagnostic)
c.
We will ignore the other diagnostics for now, as many of them are not relevant for our purposes. You can close out of the diagnostic box by clicking the X in the top right corner of the diagnostic box. For number 10 – 17 above, please go through all these steps on Character 2’s return. To get to Character 2’s return, go to the top right of your screen where it says “Client: Character 2’s Name”. Click the drop-down area and select Character 2’s return.
18.
Go to the main form manager page by pressing “F4” or “escape” on your keyboard to get to the main form screen (you may need to press multiple times if pressing “escape” to close all the forms you have been in)
a.
“F4” keep all the forms you have used open in at the top of the screen (when you’re in any form), whereas “escape” closes them all. Either way, you should be able to get back to any of those forms fairly easily. 19.
Type “ID” to get to Character 2’s ID page. Double click the ID line to go into the form. And fill in the necessary questions, as above, if not already filled out. ***You may want to save an extra copy of your return at this point (“file- save tax return as”)(then do “file-save tax return as” a second time and save it as a different name). This will often be the base scenario we will start with, so if you save an extra copy of the return at this point you won’t have to go back and restart for the next assignment when we have a difference scenario.
Start of Assignment 2: Continuing instructions
Continue the returns from up to the point of the instructions from above. Character 1 is the owner and sole shareholder of Reading Rocks Inc., a CCPC. As a corporation, it can pay
dividends out to its shareholders. This year, it pays Character 1 an eligible dividend of $10,000 and an ineligible dividend of $20,000. The eligible dividend was paid out of corporate income taxed at the high/general rate (CCPC income over $500,000), which is what makes it an eligible dividend. The ineligible dividend was paid out of corporate income taxed at the low rate (CCPC income under $500,000 eligible for the small business deduction), which is what makes it an ineligible dividend. Here is the T5 slip (Statement of Investment income) that Character 1 received before Feb 28, 2020 that illustrates the payment of these dividends for the 2019 calendar year:
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