You, CPA, work for Blaine & Diaz, a CPA firm. It is now April 29, 2023 and you have just finished meeting with Lawrence Avery, a personal tax return client, and Robert Blaine, a partner at your firm. Mr. Avery is a 43-year-old resident of Canada who is married with 2 children. Additional information about your client is provided in Exhibit I.

Mr. Avery has all his tax slips but knows its not realistic to expect his return to be completed on time. He would like to get his payment remitted right away though, so he wants you to calculate an estimate of his minimum net income for tax purposes, taxable income and federal income tax owing for 2022. He has also stated that given the current date, he knows his return will be late and would like you to calculate his estimated penalty and interest on the late filing.

Mr. Avery started a consulting business on July 1, 2022. Although he doesnt have a lot of revenue yet, hes expecting that to change in the next 2-3 years. In the meantime, he wants to know if hes required to start collecting GST, and why or why not? He would also like you to provide him with some additional information regarding GST filings, as this is new for him. Please answer the specific questions hes asked in Exhibit II.

Finally, Mr. Avery wants to reduce his 2022 tax bill as much as possible and has heard RRSP contributions are ideal, as they can be made after the end of the calendar year, and they reduce taxes. He would like to know your thoughts about making an RRSP contribution today.

Blaine wants you to draft a memo to him answering your clients questions. Round your numbers to the nearest dollar.

Your client wants to minimize taxable income and wants to see all your detailed calculations. You can ignore HST and provincial income tax. Ignore GST instalments.

Note: you will lose 1 mark for each incorrect addition/subtraction.

Exhibit I

Additional Information

• Mr. Avery is married to Angela, aged 40. She had no income in 2022 aside from what is listed below
• Mr. Avery has 2 children; Paul, aged 9 and Hannah, aged 5
• Mr. Avery has a T-slip that shows his 2022 salary as:
• Salary (gross) $95,000
• In addition, Mr. Avery bought a $100,000 Canadian treasury bill in 2022 for $98,500. He received the $100,000 on December 15, 2022
• A T-slip, in Hannahs name shows non-eligible dividend income from Motor Co. shares (before any gross-up) of $5,225
• Mr. Avery also runs a part-time consulting business as a sole-proprietorship, where he does landscaping design for Canadian clients for a fee. His 2022 revenue is outlined in Exhibit II. The December billing of $4,800 was partially collected on January 14, 2023. $300 of the total was disputed by the customer, and Mr. Avery subsequently forgave the amount
• On February 7, 2021, Mr. Avery purchased Motor Co. shares as an investment for $8,000. His goal is to pay the minimum amount of tax possible, so he immediately gifted the shares to his daughter, Hannah. On March 30, 2022, Hannah sold these shares for $10,000
• On November 15, 2022, Mr. Avery gave $55,000 to Angela. She immediately purchased Canadian mutual funds that earned: $1,250 of capital gains and $4,000 of eligible dividends in 2022
• Mr. Avery is not a stock broker and is not a day trader
• Mr. Avery has a capital loss of $2,000 carried forward from a prior tax year
• In 2022, Mr. Avery had $10,500 withheld (and remitted to the government) in federal income tax by his employer. He did not pay any federal income tax instalments in 2022
• Mr. Avery incurred $15,000 of childcare fees in 2022; $8,000 for Hannah and $7,000 for Paul
• Mr. Avery paid $3,499.80 in Canada Pension Plan (CPP) contributions in 2022. Assume that he can deduct $460.50 from his 2022 income and the rest is eligible for a tax credit. Also, in 2022 Mr. Avery paid $953 of employment insurance (EI) premiums

Exhibit II

Consulting Business

• Mr. Averys consulting revenue for 2022 was as follows, and no GST was collected on any of the amounts:

July$750August$1,450September$1,920October$5,500November$4,250December$4,800

• In 2022 he incurred the following expenses (excluding GST) related to his consulting business:
  • Business promotion $300
  • Bookkeeping fees $700
  • Hamilton (musical) tickets used to take Angela out for their 15^th wedding anniversary $4,600
  • Insurance (relating to business) $800
  • Meals (relating to meetings with clients) $550
  • Charitable donation to a Canadian registered charity $3,000
  • Personal rent expense of $36,000 (for entire home). 8% of his home is used for work purposes
• Mr. Averys questions are as follows:
  • Am I required to register for and to start collecting GST at this time?
    • If not, is there a benefit to registering early? If I was a GST registrant in 2022 how much GST would I owe? If any business expenses are not subject to GST please let me know
  • My self-employed friend told me that you can choose your filing frequency is that true?
  • Finally, what 2022 GST due dates would apply to me if I was a GST registrant?