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Acco340Lecture 11-12 - Taxes Payable

Acco340Lecture 11-12 - Taxes Payable - TAXES PAYABLE FOR...

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                                                              TAXES PAYABLE FOR INDIVIDUALS- Chapter 4 & 11 Lectures 11 & 12 -Chapter 11 Pages 519-529 General knowledge of FTC (not detailed calculation) Ignore-Prov tax, overpayment of EI& CPP/QPP, refundable credits, Repayment of OAS/EI TAXABLE INCOME-INDIVIDUALS Pursuant to the calculation of net income for tax purposes, ie, Division B and after Division C deductions, the result should normally be a positive amount known as “ Taxable Income on which a tax payable will need to be calculated. TAXES PAYABLE-BASIC SYSTEM  Federal tax is levied on taxable income.   In 2010 , tax is based on 4 levels  (tax brackets): 1.  0 % on 0 to $10,382    (if the basic exemption is considered )     15% on $10,383 to $40,970                                                      2.  22% on $40,970 to $81,940                                             3.  26% on $81,941 to $127,021 4.  29% on over $127,021                                                                                Full indexation of threshold income levels was restored in 2000, thereby eliminating "bracket  creep" that  taxed  inflationary increases. Effective 2001, provincial taxes are based on taxable income, not on basic fed taxes payable. FEDERAL TAXES PAYABLE      (before being reduced by Credits)     Progressive tax system applies higher tax rates on higher levels (ie, marginal tax brackets) of taxable income. For example,  for 2010  on taxable income of $126,264, taxes payable is:   Eg. Year 2010 Federal tax brackets on taxable income 1. 0 to $ 40,970 40, 970 X 15% = $6,146 2. $ 40,970 to $ 81,940 40,970 X 22% = 9,013 3. $ 81,941 to $127,020 45,080 X 26% = 11,721 4. $127,021 to No Max. * $26,880 +29% on excess ;no Max. *reduced by tax credits Therefore on taxable income of $127,021, – Effective Rate (ie, average) $ 26.880 = 21.2% $127,021 Marginal rate after taxable income of $127,021 = 29% Note: In addition to the ITA, Quebec residents are subject to the Quebec Income Tax Act Therefore for Quebec residents, the federal rates are reduced by a 16.5% abatement because these residents will be filing a separate income tax return pursuant to the Quebec Income Tax Act 2010 Federal Rates-for a Quebec resident 2010 Quebec Rates 1.   12.5%  on 0 to $40,970                                                         1. 16% on 0 to $38,570   2.   18.4%  on $40,970 to $81,940                                              2. 20% on $38,571 to $77,140 3.   21.7%  on $81,941 to $127,020 4.   24.2%  on over $127,020                                                      3. 24% on over $77,141                                
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Consequently, as the top federal bracket of 29% is reduced to 24.2%, this results in a top Federal / Quebec
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