A lot of people think that the following statement is true:
If you earned income in a year, you must file a tax return.
This is simply and outright wrong. Here is the official list:
https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/about-your-tax-return/you-have-file-a-return.html
If you don't owe any taxes, you don't have to file, even if you worked. If you only have a classic T4-job, the employer will take your tax away at the source.
The assertion that if an employer withholds sufficient tax from an employee, the employee is not obligated under CRA rules to file a return, is simply wrong.
This was a widely asserted misconception in this forum and other similar forums for some time, but this is the first I have seen it pop up again in . . . time flies, maybe a couple years, maybe three or four.
The requirement to file is NOT based on whether tax is still "owed," but rather on whether a tax is payable.
Do not confuse the amount entered on the line, in the tax return, for the "tax payable," with the amount on the line showing the "balance owing" upon filing the return.
If there is a "tax payable" there is an obligation to file a return, even if that amount has already been paid.
That is: You are obligated to file a return for any tax year in which "
you have to pay tax for the year." Even if someone else pays it for you.
Just because an employer withholds taxes for an employee, and submits payment to the CRA effectively on the employee's behalf, does NOT mean the employee does NOT "have to pay tax" for that given tax year.
Basically, paying the tax in advance, or someone else (like an employer) paying on your behalf in advance, does not negate the fact that the tax is payable for the year.
That said, so long as in fact all tax due has been paid, such as through employer withholding, there is NO effective penalty for failing to file as obligated by CRA rules. So someone could go years without filing a return and it is conceivable CRA will not come knocking.
BUT FOR THE CITIZENSHIP APPLICATION, TO BE ELIGIBLE, A PR MUST HAVE MET THE
FILING OBLIGATION . . . indeed, perhaps somewhat ironically, or so some might think, for citizenship eligibility the requirement is based on the FILING obligation and NOT PAYMENT. As long as the PR files a return for a year the PR is obligated to file a return, that counts as a year in which the PR met the filing obligation (any year the PR was not required to file a return counts as a year of compliance whether the PR filed a return or not). Even if the tax was NOT paid. (Of course, if the tax is not paid, CRA will come knocking.)
