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Bug in handling of Provincial Tuition and Education Amounts?


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Hi: My wife has a T2202 for tuition paid in 2019 but has no income. So, for the federal taxes, Ufile has transferred the tuition to me. For the provincial (ON) taxes, it doesn't seem like tuition can be transferred (which is fine). However, when my wife's return is generated, Ufile doesn't include ON(S11) to carry forward the unused provincial tuition. Is this a bug?

 

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Hello Nawal. I hope all is well. I did a bit more digging on the issue. There is no issue with Ufile's handling of the tuition credits.

Yes, schedule 11 deals with the federal tuition credit, but I was trying to get clarification on the provincial tuition credit.

From what I've found, Ontario's tuition and education tax credits were phased out after the 2017 tax return. If persons had accumulated credits before the phase out, they can continue to carry those forward or use them by filling out the provincial ON(S11).

It's been a long time since I've had to deal with tuition amounts; I didn't realize the provincial credit had been eliminated.

Best Regards.

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  • 1 month later...

Hi Nawal - we have corresponded on this same issue before. 

There is still a bug in Ufile Online 2019  related to the calculation of Tuition carry-forwards for Ontario students ever since the Provincial amounts were phased out for tuition fees after August 2017.

The calculation of the unused tuition amounts to carry-forward are incorrect on both the Federal S11 schedule and the Ontario ON(S11) schedule. I have been unable to convince the support folks that the CRA prescribed forms are inconsistent with the tax rules that apply to the calculation of the carry-forward amounts. 

There is a further problem in applying the tuition amounts that have been accumulated & carried forward from prior tax years.  I could not find a step in Ufile Online 2019 for claiming the carried-forward amounts that were AFR downloaded from the CRA. It appears the unused Federal amounts will continue to accumulate and carry forward to future returns  while the Provincial amounts will only be carried forward indefinitely with no way to claim them.  

 I haven't checked this out but suspect the same issue applies to all versions of Ufile Online for tax years 2017 - 2019. 

Unless I'm totally misinformed, I'd appreciate your advice / fix / workaround to this serious glitch in the program.

regards,  

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In Ontario, you can only carry forward previously unused credits before September 2017. Federally, only the tuition fees paid are eligible for the tuition tax credit. There are no credits with respect to the number of part-time/full-time months anymore, since 2017 at the federal level. The calculation is correct, both federally and for OntarioThere are no provincial tuition credits for Ontario since September 2017. If a student changed provinces, the tuition carryforwards would either be lost or limited to a specified amount, depending on the provinces. If a student did not have enough taxable income, the federal amounts will continue to be carried forward. There is no provincial tuition amount, so previously existing carryforwards can be carried forward for future years.

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  • 2 weeks later...

Thanks for the clarification ... (totally agree with your comments which confirmed my understanding of the applicable tax rules)  ... especially the reminder that carried-forward amounts are automatically claimed by the program to reduce any taxes payable (ie.  not when the student has zero tax payable / refund) and that no explicit step in the interview is required to claim these amounts.

However, the other issue identified in my post refers to the glitch in UFile's handling of Unused Tuition Amounts, where these can be transferred up to a maximum with the balance carried-forward to future tax years.  This issue was previously reported in my May 5th post under "Tuition Credit Issue - Transferring to Parent "  and relates to a 2017 Tax Return for an Ontario student claiming tuition fees for his first year at University ( ie. no prior year tuition carryforwards ) and wanting to transfer the maximum amount of his Unused Tuition Amounts to his parent not processed. 

On Federal Schedule S11,  the program fails to properly calculate the maximum transferable amount (line16) because it populates (line14) with the Federal maximum value instead of the current year's total Federal tuition amount at (line2) as specified for line14 on the form itself.  The Federal maximum value should be applied in the subsequent calculation to constrain the amount to be transferred at (line17).  

Similarly on Provincial Schedule ON(S11), the program fails to properly calculate the maximum transferable amount (line19) because it populates (line17) with the Provincial maximum value instead of the current year's total Provincial tuition amount at (line5) as specified on line17 on the form itself.  The Provincial maximum value should be applied in the subsequent calculation to constrain the amount to be transferred at (line20). 

 Bottom Line:   
The form designs of Federal Schedule S11 and Provincial Schedule XX(S11) are somewhat misleading and inconsistent with respect to S11-(line14) and XX(S11)-(line17)  leading to the incorrect implementation in the UFile program.

Again, I haven't checked this out but suspect the same issue applies to all versions of UFile Online
 

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12 hours ago, Qbert TaxTutor said:

However, the other issue identified in my post refers to the glitch in UFile's handling of Unused Tuition Amounts, where these can be transferred up to a maximum with the balance carried-forward to future tax years.  

Slight correction here - The amount transferred is the maximum allowed ($5,000 at the federal level), or less than 5K if textbook amounts + tuition is less than 5K) minus the current year tuition amounts used by the student.

If the student used 5K in tuition credits for the year, the amount allowed to be transferred is zero.

12 hours ago, Qbert TaxTutor said:

This issue was previously reported in my May 5th post under "Tuition Credit Issue - Transferring to Parent "  and relates to a 2017 Tax Return for an Ontario student claiming tuition fees for his first year at University ( ie. no prior year tuition carryforwards ) and wanting to transfer the maximum amount of his Unused Tuition Amounts to his parent not processed. 

In Ufile, did you enter a specified amount to transfer? For transferring to a parent not processed, you need to manually override the default claim, both provincially and federally if the parent isn't linked. Federal amounts should be fine. 2017 was a special year where you need to enter the correct #months and tuition fees paid before/after September 5, 2017 (Ontario only). 

I am not seeing any issues with the calculations.

image.png.6fa47462b3082e7eb44b0bee982824b8.png

Federal Schedule 11 (2017). $0 in tuition is used and $21,277.31 is available. Maximum $5,000 can be transferred, with the rest carried forward. 

image.png.4a7b237230cc946e9d6c1b98445e6368.png

Ontario Schedule 11. The provincial calculations are independent of the federal calculations. The student in this case could not transfer the maximum provincial amounts.

Can you clarify where the supposed error is taking place?

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Further to the simple case outlined in my previous post, I've marked up the erroneous Schedule 11 produced by UFile Online 2017  with the corrected calculations to effect the applicable tax rules for the maximum transfer of Current Year Unused Federal Tuition Amount to a parent not processed.  

 603831088_2017-JXXXXWXXXXX-ScheduleS11-correctresultmarked.jpg.654001d73cfebbce4c6f0c547819af3d.jpg

  The error occurs where line14 should equal the amount from line2 as stated on the form.  The comment (maximum $5,000) on line14 is misleading and does not apply until line17.

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On 7/22/2020 at 6:32 PM, Qbert TaxTutor said:

Further to the simple case outlined in my previous post, I've marked up the erroneous Schedule 11 produced by UFile Online 2017  with the corrected calculations to effect the applicable tax rules for the maximum transfer of Current Year Unused Federal Tuition Amount to a parent not processed.  

 <Image>

  The error occurs where line14 should equal the amount from line2 as stated on the form.  The comment (maximum $5,000) on line14 is misleading and does not apply until line17.

I have reviewed the Schedule 11 and Ufile is correct in its calculations. I think you are misunderstanding the rules of calculating the transfer, which I had mentioned previously (see below). If a student uses the current year tuition credits ($10,480 in your case), then the amount available to transfer is reduced ($5,000-$10,480) as a result. Because $10,480 in 2017 tuition credits were used by the student, the amount available for transfer is zero. The most compelling proof of this fact is provided by the CRA in the following:Tuition, education, and textbook amounts transferred from a child - Line 32400 of the return (previously line 324 of Schedule 1) - Common adjustments. I have also cited the formulas in the CRA income tax folio which details the calculations below.

Note: I have struck out some irrelevant information for the sake of clarity.

On 7/18/2020 at 12:43 PM, Winston said:

Slight correction here - The amount transferred is the maximum allowed is ($5,000 at the federal level) minus the current year tuition amounts used by the student.

If the student used 5K in tuition credits for the year, the amount allowed to be transferred is zero.

Because the student the student used the tuition amounts ($10,480.53), no amounts are available for transfer. In order to create a transferable amount, an additional $5,480.53 in federal tax credits/deductions available on the Schedule 1 that come before line number 324. Examples include moving expenses, student loan interest, public transit amount, etc. The ($5,000 - B) restriction has always existed but was not well known because most students don't have an income over $13,000, and want to transfer an additional amount. The Schedule 11 is identical to what is presented in the income tax guide for 2017. If the student had a net income under $18,000 for the 2017 tax year, a transfer would have been allowed. (This accounts for tuition allowed to be used by the student).

Transfer of unused tuition, education and textbook tax credits

Quote

The amount of current year tuition, education and textbook tax credits that may be transferred by a student to either a spouse or common–law partner, or in certain circumstances, to a parent or grandparent, is determined under section 118.81. Specifically, the formula provided in section 118.81 limits the amount of tuition, education and textbook tax credits eligible for transfer to a maximum dollar value, and also to the extent that the student has personal income tax otherwise payable. The formula to calculate the amount of tuition, education and textbook tax credits that may be transferred to a designated individual is as follows:

A – B

The variables in this formula are as follows:

A is the lesser of: (i) the total of the amounts that the student may claim for the year as tuition, education and textbook tax credits; and (ii) $5,000 x the lowest tax rate percentage for the year. Variable A therefore currently creates a $750 limit on the amount of the tuition, education and textbook tax credits that may be transferred (representing tuition, education and textbook credits of $5,000 x 15%)

B is the student’s Part I tax payable determined before claiming any tax credits, other than tax credits under sections 118 (personal tax credits), 118.01 to 118.07 (tax credits for adoption, public transit, children’s arts, home renovation, first-time home buyers, volunteer firefighters and search and rescue volunteers), 118.3 (tax credit for disability), 118.61 (tax credit for unused tuition, education and textbook tax credits carried forward from previous years) and section 118.7 (tax credit for premiums for CPP/QPP, QPIP and EI).

Note: Due to differing years of enactment or repeal, not all credits are available for all years. It is important to consider the legislation for the tax year for which variables A and B are being calculated.

This amount (or such lesser amount as determined by the student) may be transferred to the designated individual for the year provided the student designates in writing the amount they wish to transfer (see ¶2.62).

 

Finally, if we are to question the correctness of the calculation method, the Income Tax Act also indicates the the method in which the transfer amount is calculated.

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  • 3 weeks later...

With respect, I disagree and believe your correction is invalid in that the calculation procedure is not consistent with the actual Tax Rules related to Schedule 11.

Referring to the Schedule 11 sample, the Ufile.ca helpdesk had responded to my earlier request on this issue with the same explanation in their defense of the calculation in the UFILE Online 2017 program.

--------------------------------------------

From: UFile.ca helpdesk

Sent: Thursday, May 07, 2020 12:22 PM

Subject: tax - Request# UF596178
Tuition fees
Please view the calculation of Schedule 11.

The CRA says:
"The maximum amount the students are allowed to transfer is $5,000 less the amount they needed to use to reduce their own tax owing."

In this case, the student cannot transfer any amount to the parents:

Maximum amount : $5000
Amount of tuition used: $10,480.53.

Regards,
On behalf of the UFile Team

-------------------------------

I MAINTAIN THERE IS A BUG IN THE CALCULATION OF LINE14 OF SCHEDULE 11

The above CRA quote is confused and misleading since the CRA's tax rules (per the Income Tax Folio S1-F2-C2, Tuition Tax Credit excerpted below) are applicable as follows:

The student can transfer any/all of the current year’s UNUSED Federal amount (Line13) to a maximum of $5000 and this is the amount that goes to Line17.
The leftover balance of the current year’s UNUSED Federal amount (Line18) is then carried forward to a future year.

As is stated on the form itself, the amount in Line14 should be the 'amount from Line2' (current year’s Federal amount); so that when Line15 (current year’s Federal amount USED) is subtracted, Line16 will equal the amount of the current year’s UNUSED Federal amount that is AVAILABLE FOR TRANSFER and this amount is then subject to the (maximum $5000) that is transferrable.

The (maximum $5000) restriction does not apply at Line14 as the form indicates & contradicts itself.

Rather, the (maximum $5000) applies only to the result of the calculation for the amount to be transferred in Line17 ( ie. the lesser of Line16 or $5000 )

 

                                    QED      ..Qbert

-------------------------------

Income Tax Folio S1-F2-C2, Tuition Tax Credit

Series 1: Individuals ; Folio 2: Students ; Chapter 2: Tuition Tax Credit

Summary

When calculating Part I tax payable, a student may be able to claim the non refundable tuition tax credit. The purpose of the tuition tax credit is to allow students to reduce their income taxes by taking into account tuition fees paid for certain types of education. The amount of the tuition tax credit is determined by multiplying the lowest personal tax rate percentage (for example, 15% for years after 2006) by the amount of eligible tuition fees paid in respect of the year. The unused amount of a student’s tuition tax credit may be carried forward to future years or be transferred to a spouse or common–law partner, or to a parent or grandparent of either the student or the student’s spouse or common–law partner, subject to certain requirements and limitations.

This Chapter provides the reader with an extensive review of the legislation and related provisions concerning the tuition tax credit and is intended for readers who have a general understanding of the Act.

Carry-forward of unused tuition, education and textbook tax credits

Overview

 

2.46 Effective January 1, 2017, the education and textbook tax credits have been eliminated. This measure does not eliminate the tuition tax credit, and it does not affect a student’s ability to claim the education and textbook tax credits for 2016 and prior tax years. Unused education and textbook credit amounts carried forward from years prior to 2017 will remain available to be claimed in years after 2016. For more information, see Income Tax Folio S1-F2-C1, Education and Textbook Tax Credits.

Section 118.61 provides for the carry-forward of a student’s unused tuition tax credits for the current year to future tax years. The carry-forward rules also apply to the education and textbook tax credits. Alternatively, students may transfer the unused portion of their tuition, education and textbook tax credits for the year (up to certain limits) to a spouse or common–law partner or to a parent or grandparent (see ¶2.55 - 2.59). Students are permitted to use a combination of these options to transfer a part of the unused portion of these credits and keep the remaining balance for use in future years. However, unused tax credits that are carried forward to a future year may not subsequently be transferred.

Transfer of unused tuition, education and textbook tax credits

2.55 As discussed in ¶2.46, effective January 1, 2017, the education and textbook tax credits have been eliminated. This measure does not eliminate the tuition tax credit, and does not eliminate a student’s ability to carry-forward or transfer the tuition tax credit. It does not affect a student’s ability to claim the education and textbook tax credits for the 2016 and prior tax years. As sections 118.8 and 118.9 only allow a student to transfer to a spouse or common-law partner or to a parent or grandparent credits earned in the current year, the 2016 tax year is the final year that a student may transfer education and textbook tax credits. For more information regarding the elimination of the education and textbook tax credits, see Income Tax Folio S1-F2-C1.

The amount of current year tuition, education and textbook tax credits that may be transferred by a student to either a spouse or common–law partner, or in certain circumstances, to a parent or grandparent, is determined under section 118.81. Specifically, the formula provided in section 118.81 limits the amount of tuition, education and textbook tax credits eligible for transfer to a maximum dollar value, and also to the extent that the student has personal income tax otherwise payable.

Schedule 11 Tuition Xfer bug.odt

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If what you are claiming is true, then you are implying that the forms provided from the CRA and all other tax preparation companies are wrong. The form used shows the same line numbers and references. It is the prescribed form to do the calculations. Unless you can show that a different software program is calculating a different result, that is in line with what you've said.

Your reference does not prove anything.No where in the act does it specify the calculation as how you interpret it. Even if you attempted to do this, it would be disallowed by the CRA on the basis you made a calculation error. It would be up to you to prove the CRA is wrong. Further, you conveniently ignore the rest of 2.55, which does outline the exact calculation I referred to. I have bolded for emphasis the calculation which clearly sets the cap that describes A

Quote

 

Transfer of unused tuition, education and textbook tax credits

The amount of current year tuition, education and textbook tax credits that may be transferred by a student to either a spouse or common–law partner, or in certain circumstances, to a parent or grandparent, is determined under section 118.81. Specifically, the formula provided in section 118.81 limits the amount of tuition, education and textbook tax credits eligible for transfer to a maximum dollar value, and also to the extent that the student has personal income tax otherwise payable. The formula to calculate the amount of tuition, education and textbook tax credits that may be transferred to a designated individual is as follows:

A – B

The variables in this formula are as follows:

is the lesser of: (i) the total of the amounts that the student may claim for the year as tuition, education and textbook tax credits; and (ii) $5,000 x the lowest tax rate percentage for the year. Variable A therefore currently creates a $750 limit on the amount of the tuition, education and textbook tax credits that may be transferred (representing tuition, education and textbook credits of $5,000 x 15%)

is the student’s Part I tax payable determined before claiming any tax credits, other than tax credits under sections 118 (personal tax credits), 118.01 to 118.07 (tax credits for adoption, public transit, children’s arts, home renovation, first-time home buyers, volunteer firefighters and search and rescue volunteers), 118.3 (tax credit for disability), 118.61 (tax credit for unused tuition, education and textbook tax credits carried forward from previous years) and section 118.7 (tax credit for premiums for CPP/QPP, QPIP and EI).

 

A is $750, and B is $10428 * 0.15 = $1564.20

It follows that A - B is less than zero. No amounts are available for transfer.

Just because you disagree with the form's prescribed calculations does not mean you are right, or that there is an error with the software.

As previously stated by CRA:

Tuition, education, and textbook amounts transferred from a child - Line 32400 of the return (previously line 324 of Schedule 1)

Quote

 

The maximum amount that can be transferred from each child is $5,000 minus the amounts the student needs to use, even if there is still an unclaimed part. Tuition, education, and textbook amounts that the student carried forward from a previous year cannot be transferred.

The student has to complete Schedule 11, Tuition, Education, and Textbook Amounts, to calculate the transfer amount.

 

 

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