Question 4: 2019 Tax Bill

Please compute the total tax due (April 30th, 2020) for the following single (non-senior, nonmarried) resident of Ontario.

During the 2019 tax year, they earned $160,000 in (gross) T4 employment income. From this sum, $40,000 was deducted by their employer (for provincial and federal taxes) at source and remitted to the Canada Revenue Agency, which may or may not be enough to cover their tax bill. They also paid the full Canadian Pension Plan (CPP) premiums and Employment Insurance (EI) premiums for 2019. They contributed $10,000 to an RRSP and plans to utilize the entire deduction. In addition, they received $3,500 in interest income from a Canadian bank and $350 in dividends from her stockholdings (which involved only Canadian companies). Lastly, they provided 4.5 hours of volunteer service to their local fire department each Sunday and made $6,500 in charitable contributions during the 2019 tax year.

Part A: How much does the individual owe in total (Federal and Provincial and surtax) income tax for the year? (This amount would be due on April 30th, 2020.) Make sure to use the proper Ontario and Federal tax rates for 2019. Make assumptions if necessary but do not assume away any valid deductions or credits. Use the 2019 tax rates and carefully show all your work, including (i.) Federal Tax, (ii.) Ontario basic Tax, and (iii.) Ontario Surtax.

Part B: What is the marginal tax rate? Average tax rate? Explain the difference between the two