MOS 2277: MOS Personal Financial
Planning Final Exam Questions with All
Correct Answers (2025-2026) Updated.
Why do we pay taxes? - Answer Taxes are an integral part of our economy. - Taxes are a
significant source of funding for governments and are used to pay for a variety of services that
we use in our day to day lives.
With respect to taxation, what is the role of the federal government, namely with the CRA? -
Answer The CRA administers the Act and distributes and collects the forms and publications
that taxpayers use to calculate their income tax.
Define personal income tax - Answer Taxes you pay as income is earned during the year in a
process called withholding (tax is withheld from each paycheque as income is earned
throughout the year)
What is the purpose of the TD1 form? Why is it important? - Answer Helps the employer
calculate the amount of taxes to withhold. Also allows the individual to specify the personal tax
credits for which they qualify.
What types of taxes are paid on consumer purchases? Provide
some examples of an excise tax. - Answer Sales taxes (GST, PST, HST). Excise taxes: special
taxes on certain products like cigarettes, alcohol, gas
What is a capital asset? Under what circumstances would you
incur a capital gain on a capital asset? - Answer Any asset that is acquired and held for the
purpose of generating income. A capital gain arises if the asset is sold at a value greater than its
original or adjusted cost.
Which level of government collects property taxes? - Answer Municipal governments.
Under what circumstances do you have to file a tax return? - Answer If you have to pay tax
for a calendar year/the CRA sent you a request to file a return
Provide four reasons why students should file a tax return. - Answer 1. May be eligible for a
refundable GST/HST credit 2. Likely have eligible tuition tax credits that can be used to reduce
tax payable 3. More RRSP room: By filing a return and declaring income, you will have more
contribution room in the future.
,When does the tax year end? By what date do taxpayers have to
file their income tax returns? - Answer Tax year ends December 31. Taxpayers must file and
pay by April 30.
What is the penalty if you do not pay taxes owing by the due
date? - Answer You will incur interest charges and a late-filing penalty that will be assessed
based on any amounts owing.
Describe the different ways in which a taxpayer may file their tax
return. - Answer 1. Mail hard copy with receipts attached prior to April 30 2. File return by
email (NETFILE) 3. EFILE - lets authorized service providers complete and file your return
electronically
What is the purpose of a Notice of Assessment? - Answer Confirms or provides corrections
to the filed return
What are the eight steps to completing a T1 General? - Answer 1. Calculate total income 2.
Subtract deductions 3. Calculate taxable income 4. Calculate net federal tax payable 5. Calculate
net provincial tax payable 6. Calculate total tax payable 7. Determine total tax already paid 8.
Refund? If not, pay off balance owing.
What is a T4 slip? - Answer Shows salary and all deductions associated with your
employment
What is total income? List some types of income that are included
in total income. - Answer Consists of all reportable income from any source: salary, wages,
commissions, government benefits, pension income, etc.
In general, under what circumstance is someone considered self employed? - Answer If 1)
they have control over the work they do 2) they have taken on financial risk and reward that
comes with the title 3) job duties are independent of any employer 4) provide and maintain
their own tools and equipment
What is interest income? What is the purpose of a T5 slip? - Answer Income earned from
interest through investments (GICs, Term deposits, loans, etc.) T5 slip is a document provided to
you when you receive income other than salary income.
What is dividend income? What is the purpose of the dividend
adjustment? - Answer Represents income received from corporations in the form of
dividends paid. The dividend adjustment was created to avoid double taxation.
,Describe the distinction between eligible and non-eligible
dividends. - Answer Eligible dividends are dividends paid to large corporations and non-
eligible dividends are dividends paid by Canadian-controlled private corporations (CCPCs)
What is the difference between a capital gain and a capital loss? - Answer Capital gain is
when you sell an asset at a higher price than what you paid and a capital loss is when you sell a
capital asset for a lower price than you paid.
What are deductions? Describe the most common types of
deductions. - Answer Deductions are allowed for costs you incur that allow you to perform
your job duties (Contributions to a RPP, RRSP, union dues, child care expenses, etc.)
What is net income? Differentiate between net income and
taxable income. - Answer Represents the amount remaining after subtracting deductions
from your total income. Taxable income is equal to net income minus some deductions.
What is meant by a progressive tax system? What is the difference
between marginal and average tax rates? - Answer Marginal tax: percentage of tax you pay
on your next dollar of taxable income. Average tax: represents the amount of tax as a
percentage of total income.
What is a tax credit? What is the difference between a refundable
and non-refundable tax credit? - Answer Specific amount used to reduce tax owing.
Refundable: portion of credit that is not needed to reduce tax owing. Non-refundable: portion
of the credit will not be paid to you and cannot be carried forward.
What is the difference between a tax deduction and a tax credit?
With respect to reducing the amount of tax paid, which one is
more valuable from the taxpayer's perspective? - Answer Tax deduction reduces tax owing
based on your highest marginal tax bracket. Reduces tax more effectively for those who have
taxable income greater than $45,282 in 2017.
List some examples of refundable and non-refundable tax credits. - Answer Refundable:
Ontario Property Tax Credit
Under what circumstances can you claim the interest paid on
your student loans as a tax credit? - Answer If the loan was made under the Canada Student
Loans Act, the Canada Student Financial Assistance Act
, Describe the Tuition Amount tax credit. - Answer You can claim the amount you paid for
eligible tuition fees. Amounts claimed for tuition, education, and textbook prior to 2017 may
still be carried forward.
List the non-refundable tax credits that are transferable. List the
non-refundable tax credits that may be carried forward. - Answer Tuition amount, pension
income amount, age amount, disability amount can be transferred. Medical expenses amount,
tuition amount, former tuition, education and textbook amount can be carried forward.
What is the difference between tax avoidance and tax evasion? - Answer Tax avoidance:
when taxpayers legally apply tax law to reduce or eliminate taxes payable Tax evasion: when
taxpayers knowingly report less tax payable than what they are obligated to pay
Explain how different types of income received will make a
difference in the amount of tax you pay. - Answer Capital gains taxes, for example, are taxed
at 50% of the capital gain as opposed to income taxes which are based on marginal tax rates.
Thus, the way in which you receive income has drastic effects on the amount that is taxable.
What is a registered education savings plan (RESP)? Explain how
the Canada Education Savings Grant (CESG) works. - Answer The first $2500 of annual RESP
contributions will be matched by a 20 percent Canada Education Savings
Grant (CESG), to a maximum of $500, from Employment and Social
Development Canada (ESDC).
What are the differences between an educational assistance
payment (EAP) and an accumulated income payment (AIP)? - Answer Educational assistance
payment (EAP): taxable amount paid to a beneficiary from an RESP. Accumulated income
payment (AIP): taxable amount paid to a subscriber (contributor) from an RESP
What is the purpose of a registered disability savings plan
(RDSP)? - Answer Savings plan to help parents and others save for the long-term financial
security of a person who is eligible for the disability tax credit.
What is a tax-free savings account (TFSA)? How can it help to
reduce tax payable? - Answer Registered investment account that allows you to purchase
investments without attracting any tax payable on your investment growth.
What are the major deductions and tax credits that can be used
Planning Final Exam Questions with All
Correct Answers (2025-2026) Updated.
Why do we pay taxes? - Answer Taxes are an integral part of our economy. - Taxes are a
significant source of funding for governments and are used to pay for a variety of services that
we use in our day to day lives.
With respect to taxation, what is the role of the federal government, namely with the CRA? -
Answer The CRA administers the Act and distributes and collects the forms and publications
that taxpayers use to calculate their income tax.
Define personal income tax - Answer Taxes you pay as income is earned during the year in a
process called withholding (tax is withheld from each paycheque as income is earned
throughout the year)
What is the purpose of the TD1 form? Why is it important? - Answer Helps the employer
calculate the amount of taxes to withhold. Also allows the individual to specify the personal tax
credits for which they qualify.
What types of taxes are paid on consumer purchases? Provide
some examples of an excise tax. - Answer Sales taxes (GST, PST, HST). Excise taxes: special
taxes on certain products like cigarettes, alcohol, gas
What is a capital asset? Under what circumstances would you
incur a capital gain on a capital asset? - Answer Any asset that is acquired and held for the
purpose of generating income. A capital gain arises if the asset is sold at a value greater than its
original or adjusted cost.
Which level of government collects property taxes? - Answer Municipal governments.
Under what circumstances do you have to file a tax return? - Answer If you have to pay tax
for a calendar year/the CRA sent you a request to file a return
Provide four reasons why students should file a tax return. - Answer 1. May be eligible for a
refundable GST/HST credit 2. Likely have eligible tuition tax credits that can be used to reduce
tax payable 3. More RRSP room: By filing a return and declaring income, you will have more
contribution room in the future.
,When does the tax year end? By what date do taxpayers have to
file their income tax returns? - Answer Tax year ends December 31. Taxpayers must file and
pay by April 30.
What is the penalty if you do not pay taxes owing by the due
date? - Answer You will incur interest charges and a late-filing penalty that will be assessed
based on any amounts owing.
Describe the different ways in which a taxpayer may file their tax
return. - Answer 1. Mail hard copy with receipts attached prior to April 30 2. File return by
email (NETFILE) 3. EFILE - lets authorized service providers complete and file your return
electronically
What is the purpose of a Notice of Assessment? - Answer Confirms or provides corrections
to the filed return
What are the eight steps to completing a T1 General? - Answer 1. Calculate total income 2.
Subtract deductions 3. Calculate taxable income 4. Calculate net federal tax payable 5. Calculate
net provincial tax payable 6. Calculate total tax payable 7. Determine total tax already paid 8.
Refund? If not, pay off balance owing.
What is a T4 slip? - Answer Shows salary and all deductions associated with your
employment
What is total income? List some types of income that are included
in total income. - Answer Consists of all reportable income from any source: salary, wages,
commissions, government benefits, pension income, etc.
In general, under what circumstance is someone considered self employed? - Answer If 1)
they have control over the work they do 2) they have taken on financial risk and reward that
comes with the title 3) job duties are independent of any employer 4) provide and maintain
their own tools and equipment
What is interest income? What is the purpose of a T5 slip? - Answer Income earned from
interest through investments (GICs, Term deposits, loans, etc.) T5 slip is a document provided to
you when you receive income other than salary income.
What is dividend income? What is the purpose of the dividend
adjustment? - Answer Represents income received from corporations in the form of
dividends paid. The dividend adjustment was created to avoid double taxation.
,Describe the distinction between eligible and non-eligible
dividends. - Answer Eligible dividends are dividends paid to large corporations and non-
eligible dividends are dividends paid by Canadian-controlled private corporations (CCPCs)
What is the difference between a capital gain and a capital loss? - Answer Capital gain is
when you sell an asset at a higher price than what you paid and a capital loss is when you sell a
capital asset for a lower price than you paid.
What are deductions? Describe the most common types of
deductions. - Answer Deductions are allowed for costs you incur that allow you to perform
your job duties (Contributions to a RPP, RRSP, union dues, child care expenses, etc.)
What is net income? Differentiate between net income and
taxable income. - Answer Represents the amount remaining after subtracting deductions
from your total income. Taxable income is equal to net income minus some deductions.
What is meant by a progressive tax system? What is the difference
between marginal and average tax rates? - Answer Marginal tax: percentage of tax you pay
on your next dollar of taxable income. Average tax: represents the amount of tax as a
percentage of total income.
What is a tax credit? What is the difference between a refundable
and non-refundable tax credit? - Answer Specific amount used to reduce tax owing.
Refundable: portion of credit that is not needed to reduce tax owing. Non-refundable: portion
of the credit will not be paid to you and cannot be carried forward.
What is the difference between a tax deduction and a tax credit?
With respect to reducing the amount of tax paid, which one is
more valuable from the taxpayer's perspective? - Answer Tax deduction reduces tax owing
based on your highest marginal tax bracket. Reduces tax more effectively for those who have
taxable income greater than $45,282 in 2017.
List some examples of refundable and non-refundable tax credits. - Answer Refundable:
Ontario Property Tax Credit
Under what circumstances can you claim the interest paid on
your student loans as a tax credit? - Answer If the loan was made under the Canada Student
Loans Act, the Canada Student Financial Assistance Act
, Describe the Tuition Amount tax credit. - Answer You can claim the amount you paid for
eligible tuition fees. Amounts claimed for tuition, education, and textbook prior to 2017 may
still be carried forward.
List the non-refundable tax credits that are transferable. List the
non-refundable tax credits that may be carried forward. - Answer Tuition amount, pension
income amount, age amount, disability amount can be transferred. Medical expenses amount,
tuition amount, former tuition, education and textbook amount can be carried forward.
What is the difference between tax avoidance and tax evasion? - Answer Tax avoidance:
when taxpayers legally apply tax law to reduce or eliminate taxes payable Tax evasion: when
taxpayers knowingly report less tax payable than what they are obligated to pay
Explain how different types of income received will make a
difference in the amount of tax you pay. - Answer Capital gains taxes, for example, are taxed
at 50% of the capital gain as opposed to income taxes which are based on marginal tax rates.
Thus, the way in which you receive income has drastic effects on the amount that is taxable.
What is a registered education savings plan (RESP)? Explain how
the Canada Education Savings Grant (CESG) works. - Answer The first $2500 of annual RESP
contributions will be matched by a 20 percent Canada Education Savings
Grant (CESG), to a maximum of $500, from Employment and Social
Development Canada (ESDC).
What are the differences between an educational assistance
payment (EAP) and an accumulated income payment (AIP)? - Answer Educational assistance
payment (EAP): taxable amount paid to a beneficiary from an RESP. Accumulated income
payment (AIP): taxable amount paid to a subscriber (contributor) from an RESP
What is the purpose of a registered disability savings plan
(RDSP)? - Answer Savings plan to help parents and others save for the long-term financial
security of a person who is eligible for the disability tax credit.
What is a tax-free savings account (TFSA)? How can it help to
reduce tax payable? - Answer Registered investment account that allows you to purchase
investments without attracting any tax payable on your investment growth.
What are the major deductions and tax credits that can be used
