Chapter16: Tax return for kids

Summary: The article talks about why we should file a tax return for kids. Basically children earn less than the basic personal amount, which was 9600 dollars in 2008; they still should file a tax return for a minor. First of all, one reason is to report income the child may have earned from casual, part-time or summer employment. “Filling a tax return early in life can bolster the amount that can later be socked away in an RRSP.” Now TFSA makes this strategy even more palatable. Young people starting their first jobs, and in the lowest tax bracket, are discouraged from making RRSP contributions until they get into a higher tax bracket.

Connection: In chapter 16, we learned about tax return. Not just adults but also teenagers need to file a tax return, even though their tax payment is small. After children file a tax return, they can put some of the money into TFSA (the recent introduction of the tax-free savings account), which is same as RRSP (Registered Retirement Savings Plan). These two accounts let us save our money for our retirement and lower our income taxes. The only difference is, TFSA is for lower tax bracket, and RRSP is for higher tax bracket.

Reflection: When I was 16, my mother told me to file a tax return. The only thing I knew from that time is to let the government created my file. After I read this article, I understand everything. Even teenagers need to plan their retirement. Once we plan it earlier, we could have a comfortable retirement. More over, RRSP/ TFSA are a kind of life insurance. They work the same way to protect ourselves. Also RRSP has another benefit, which can lower the income. Since we have a higher income, we suppose to pay more taxes, or get a lower tax return. But when we purchase RRSP, we can pay fewer taxes, or get a higher tax return.
Article: http://www.canada.com/business/story.html?id=1462907