# Why did my son's tuition lower his tax refund?



## gibor365

All this taxation stuff is so confusing :distress: My son is a student, he also worked in 2014.... When he entered T4 , T5, T4A - his refund was about $1,300 , but when he entered $9,000 tuition -> refund dropped to $300!!!
I was thinking that if you pay tuition, refund should be higher , not lower....
Why it's happening?


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## Silverbird

gibor said:


> All this taxation stuff is so confusing :distress: My son is a student, he also worked in 2014.... When he entered T4 , T5, T4A - his refund was about $1,300 , but when he entered $9,000 tuition -> refund dropped to $300!!!
> I was thinking that if you pay tuition, refund should be higher , not lower....
> Why it's happening?


If you are referring to doing taxes in Turbotax or something, there is tons of calcs happening behind the scenes, It is really deceiving looking at the refund/owing at any point in the process until the last slip is entered and "interview question" answered. It can swing wildly throughout the process.

Now that the return is complete, Now he can compare the impact of a change by going back to just the tuition slip and temporarily making the amount $0, and then seeing what the refund amount changes to - this is the only way to assess the impact. Wouldn't be surprised if either:
1) He is actually owing tax without the tuition credit (if he had lower witholdings at his job as they compensated for the tuition amounts)
2) His earnings were low and Not all of the tuition credit was required and is being carried forward (This is a non-refundable tax credit)
http://www.taxtips.ca/filing/students/tuitiontaxcredit.htm


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## Coronam

You are right, it should have reduced your tax payable (thus increase the tax refund).

Has your son's institution issue a T2202A form? It is usually available online, at the institution's student account. Once received, use it to prepare Schedule 11 to claim this tax credit.

Note that the tuition tax credit cannot be claimed if your son's employer paid all or part of the tuition, unless you include this reimbursement in your son's taxable income.


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## gibor365

Sure, T2202A was issued..... this is amount he entered ~$9,000 from this slip .... I tried to do some research and found one explanation.... when he enters T4 and his gross income around 10,000 (and he paid taxes around $300,also some EI and CPP amounts), turbotax thinks that he's low-income salary worker and adding WITB (The working income tax benefit ). 
When he entered T2202A, turbotax realizes that he's full time student and removes WITB credit, thus refund is getting reduced from $1,300 to $300...(because looks like full time students is not eligible to WITB). Does it make sense? For me it doesn't make sense, as person who just working is getting $1,000 more refund that person who is working and studying same time... Doesn't government should encourage young guys to study?!
My son got upset, and don't want to enter his tuition at all  , but I don't think it's legal....


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## Guban

Turbo tax is correct. The WITB is designed to get people to get a modest job rather than getting welfare. A full time student is not in this category. 

Don't forget that the $9k paid plus education and book amounts will result in a bigger tax refund for you and/or your son ... eventually.

I think this is fair, and hope that the government does not change this, or we will all find our selves paying even more tax to students who choose to stay in school.


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## OptsyEagle

Thanks for working that out for us Gibor. Glad we could be of help. lol.

I can't talk too much about fairness, but you are talking about losing something that your son was never eligible for in the first place. Many Canadian taxpayers are not eligible for the WITB. I am pretty sure you are not and I know I am not going to get it.

It is one the first times our government decided to give something to someone that gives a person incentive to actually work and produce economic activity right now. Most times the benefits go to someone who is sitting at home on their couch. I know your son is working hard to get there but isn't quite there yet. All that being said, take a close look at the "tax payable" line on page 4 of his tax return and I suspect you will find that our country is not asking him to pay very much, or even any tax at all.

Anyway, it is the first time I have seen the issue you reported, since the WITB is quite new, so thanks again for bringing it to our attention.


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## CPA Candidate

If his gross income is only 10k, he's not even going to use the tuition credits this year.


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## gibor365

> hat gives a person incentive to actually work and produce economic activity right now. Most times the benefits go to someone who is sitting at home on their couch. I know your son is working hard to get there but isn't quite there yet. All that being said, take a close look at the "tax payable" line on page 4 of his tax return and I suspect you will find that our country is not asking him to pay very much, or even any tax at all.
> 
> Anyway, it is the first time I have seen the issue you reported, since the WITB is quite new, so thanks again for bringing it to our attention.


I completely understand that it's better to pay incentive to low income workers rather than pay welfare, but on other hand I completely understand why my son is upset....1 semester he's working , other semester he's in university and his refund got deducted by $1,000


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## OptsyEagle

gibor said:


> I completely understand that it's better to pay incentive to low income workers rather than pay welfare, but on other hand I completely understand why my son is upset....1 semester he's working , other semester he's in university and his refund got deducted by $1,000


Not really. His refund was only the mistake you made by looking at the results before all the numbers were inputed into the software. He was never eligible for that refund. 

That is like adding $1000 to his tax withheld BY MISTAKE and then being upset when the mistake is noticed and the $1,000 erroneous refund is removed. 

The main lesson to be learned here is NOT to look at the results until all the numbers have been accurately entered into the tax software.


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## Silverbird

OptsyEagle said:


> Not really. His refund was only the mistake you made by looking at the results before all the numbers were inputed into the software. He was never eligible for that refund.
> 
> That is like adding $1000 to his tax withheld BY MISTAKE and then being upset when the mistake is noticed and the $1,000 erroneous refund is removed.
> 
> The main lesson to be learned here is NOT to look at the results until all the numbers have been accurately entered into the tax software.


Agreed, I almost wish the software would not give the running total and only give a number after all the info has been input the first time. Then you can go in and check what drove the result


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## gibor365

Silverbird said:


> Agreed, I almost wish the software would not give the running total and only give a number after all the info has been input the first time. Then you can go in and check what drove the result


...or soft should right away to drop WITB, because in interview section my son indicated that he's full time student.... 
We wasted a lot of time trying to understand why suddenly refund got fropped by 1K


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## tenoclock

gibor said:


> All this taxation stuff is so confusing :distress: My son is a student, he also worked in 2014.... When he entered T4 , T5, T4A - his refund was about $1,300 , but when he entered $9,000 tuition -> refund dropped to $300!!!
> I was thinking that if you pay tuition, refund should be higher , not lower....
> Why it's happening?


Because he was getting the Working Income Tax benefit for low income individuals, but he is not eligible for that if he is a student. If you enter a tuition amount, the software correctly assumes you are not eligible for the WITB and therefore your refund goes down.

WITB is a refundable credit so it's not taxes that he already paid and not receiving back, it's more of a gift from the government. 

At 10K of income, he is not paying any tax anyway. Just a little bit of CPP..


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## OptsyEagle

The most common one, I think, is the spousal tax credit. 

A person will plan to do both tax returns, but after inputting the info on the first return, they take a peak at the tax refund area. It is usually about $2,200 higher then it should be, because the software does not know that their spouse was working, since that info has not been entered yet. Once the spouses info is entered the software who gaveth thy big refund, quickly taketh thy refund away.

The good news is you usually only do that once. The bad news is if you tell your wife she is getting the big refund before all the info is entered. Luckily I never did that, since I usually play a few scenarios with charitable donations and a few other things, once the data is all in, so I know things may change. No sense getting anyone's hopes up. It did take me a few minutes to figure it out though and was a little annoying, but what can you do?


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## Homerhomer

gibor said:


> ...or soft should right away to drop WITB, because in interview section my son indicated that he's full time student....
> We wasted a lot of time trying to understand why suddenly refund got fropped by 1K


Gibor, you like to complain, don't you ;-)

I waste a lot of time fixing holes in the wall and that's because I have no clue what am I doing, the same with your son, he has very little knowledge about taxes so he has to compensate for lack of it with more effort and time, not the software fault.

He doesn't qualify for WITB because it's not designed for students who are making extra money working in free time, students already receive a lot of breaks in form for reduced tuition, grants, tax credits and such, be thankful for once.


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## gibor365

> The bad news is if you tell your wife she is getting the big refund before all the info is entered.


 Ha ha  , I enterd my wife data, but not mine (I didn't get my T4 yet)...so was surprised why refund was so nice  ,



> Gibor, you like to complain, don't you ;-)


 Sure, as very happy people live mostrly in "mental institutions" 



> students already receive a lot of breaks


 On other hand, a lot of countries have free post secondary education 
http://en.wikipedia.org/wiki/Free_education


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## tenoclock

Those countries also have higher taxes. Anything that needs to be produced is not really free in economic terms.


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## gibor365

tenoclock said:


> Those countries also have higher taxes. Anything that needs to be produced is not really free in economic terms.


Not neccessary, some has higher, some lower  All depends on what country spends those taxes....
http://en.wikipedia.org/wiki/List_of_countries_by_tax_rates


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## gibor365

I actually like Russian post secondary system.... To enter university you need to have several tests, you past tests with good marks (depends on University) and you study for free, you don't pass- > in order to study you have to pay..... goes very well with 13% flat tax rate


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## tenoclock

The list of countries where it mentions free post secondary education is mostly wrong. India or Pakistan for example, do not have free post secondary education. They have heavily subsidized government owned universities, but the standard of those are way below par. In fact it's so bad that most people attend private universities there and they expect to pay heavy tuition fees. I don't have any doubt that the situation is the same in countries like Argentina, Brazil and other South America or Sub Saharan countries. And come on, Greece? :biggrin:
The Gulf countries are oil rich with state owned oil companies, they can afford to provide free post secondary education to their citizens (most of them choose to go abroad because they have money). Which leaves us with a few northern European countries such as France, Sweden, Germany, Finland etc. All these countries have much higher taxes than Canada, and consequently lower per capita GDP.


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## gibor365

> The Gulf countries are oil rich


 Canada also oil rich :biggrin:

As I said above, I like Russian system where smart kids can study in best universities for free


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## OptsyEagle

gibor said:


> I like Russian system where smart kids can study in best universities for free


In my perfect world, the amount of tuition would vary depending on what course you take. If you take a course that is in high demand by Canadian businesses then your tuition would be much lower. If what you take is not in high demand, like a masters in history or some other ridiculous and mostly useless course, then you would pay a ridiculously high tuition.

The only problem with my plan is ... who gets to decide what skills our Canadian businesses will need, tomorrow. I know the government would mess it all up, if we made them the deciders, as would probably any other human being. It's probably as difficult as picking the stocks of businesses that a person thinks will be successful in the future. Very prone to errors. Anyway, the plan is a good one, it is just executing it that is the problem.


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## tenoclock

What about a Masters in Women Studies? If fees for that is high (because no business requires it), all hell will break loose and we all become patriarchal nazis
Or my favorite, Masters in English. Could get you a government job though. But required by businesses? hehe no


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## gibor365

> In my perfect world,


Your system is too complex , but what bad in Russian-like systemÉ! 
For example , good university accept for some very popular program 100 students for free... 1000 applied and doing tests, so 10% with highest marks study for free... if somebody didn`t make top 10%, he can pay $ and study or go to another less demanding program.... imho it`s fair


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## 0xCC

How is the Russian system different from scholarships here (other than maybe the scholarship isn't granted by the University)?


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## Davis

Crumbling economy, authoritarian regime, sham democracy, human rights abuses, secretive invasion of neighbouring country and seizure of territory.... I don't know specifically about the postsecondary system, but I have trouble listening to someone hold Russia up as a model without pointing out that the country is a basketcase that no sane country would want to emulate.


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## Homerhomer

OptsyEagle said:


> In my perfect world, the amount of tuition would vary depending on what course you take. If you take a course that is in high demand by Canadian businesses then your tuition would be much lower. If what you take is not in high demand, like a masters in history or some other ridiculous and mostly useless course, then you would pay a ridiculously high tuition.
> 
> The only problem with my plan is ... who gets to decide what skills our Canadian businesses will need, tomorrow. I know the government would mess it all up, if we made them the deciders, as would probably any other human being. It's probably as difficult as picking the stocks of businesses that a person thinks will be successful in the future. Very prone to errors. Anyway, the plan is a good one, it is just executing it that is the problem.


Agree on both counts, we have way too many students, and many do not work in their fields afterwards so in essense the investment the taxpayers make into it is wasted, with social and economical issues coming into the play it would be quite difficult to make significant changes.

And if I hear one more time about the superior Russian system I think I am gonna vomit.


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## gibor365

0xCC said:


> How is the Russian system different from scholarships here (other than maybe the scholarship isn't granted by the University)?


It's completely different ....my son got one time $1,000 scholarship (some not very good places can give a bit more)... I was talking about FREE education ... 



> And if I hear one more time about the superior Russian system I think I am gonna vomit


 Warning! Don't lay on you back 
I have post secondary Russian and Canadian education and can compare....

Maybe this is one of the reasons that:


> If the English ancestry group does not have the highest concentration of millionaire households, then which group does? The Russian ancestry group ranks first, the Scottish ranks second, and the Hungarian ranks third. Although the Russian ancestry group accounts for only about 1.1 percent of all households in America, it accounts for 6.4 percent of all millionaire households. We estimate that approximately 22 of every 100 households headed by someone of Russian ancestry has a net worth of $1 million or more. This is in sharp contrast to the English ancestry group, in which only 7.71 in 100 of its members are in the millionaire league. How much wealth does this Russian American millionaire group have in total? We estimate approximately $1.1 trillion, or nearly 5 percent of all the personal wealth in America today!


The Millionaire Next Door: The Surprising Secrets of America's Wealthy (ISBN 0-671-01520-6) by Thomas J. Stanley


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