Filing your Personal Income Tax Return in Canada

Table of Contents

• Overview
• What are tax returns?
• When do I need to file my taxes?
• How can I know whether I should pay income tax or not?
• What are the benefits of filing a tax return? Deductions, Benefits, and Credits
• What do I need when filing my taxes? 
• How can I file my taxes in Canada?
• About CanadaVisa and Cohen Immigration Law

Overview of Personal Tax in Canada

As in many countries, tax is collected in Canada to help support the country’s domestic infrastructure, national defence, education, healthcare and much more.

Note that along with sales added taxes (Harmonised Sales Tax (HST), Generalised Sales Tax (GST)—which can vary from province to province) there are two income tax rates that must be adhered to when paying taxes—the provincial tax rate (which is determined by where someone is residing), and the federal income tax rate, which applies to everyone in Canada.

What are tax returns?

A tax return (often simply referred to as “doing one’s taxes”) is a personal and comprehensive financial account of income for the year. The purpose of the tax return is to determine whether one is eligible for a tax deduction or refund at the end of the year—depending on whether taxes were under or overpaid respectively.

When do I need to file my taxes?

In Canada, income taxes are due for the previous year by April 30^th. There is a penalty for filing taxes after this date.

Note that this specifically applies to personal income tax for employed individuals, self-employed individuals must submit their taxes by June 15^th.

How can I know whether I should pay tax or not?

All citizens, permanent residents, and deemed residents currently residing in Canada must file their income taxes. In some cases, non-residents outside the country must also pay Canadian income tax.

Requirement to file taxes is based broadly on one’s residency status. Note that this is determined and administered by the Canadian Revenue Agency (CRA); and works off a system of residential ties that is separate from the legal (immigration-based) definition of a resident. A complete guide on determining residential ties is available here.

If you are a resident of Canada, you will need to file your tax returns if:

• You’ve had a source of income (Canadian or international);
• You owe the government money, or would like to claim a refund/benefit;
• You want to claim GST or HST sales tax, or any provincial credits (more on this later);
• You were contacted by the CRA to file a tax return; and
• You have already received any kind of tax benefit from the government or earned income from selling capital property.

If one doesn’t have any income, or made a modest amount of money, they are still encouraged to file tax returns, and may receive benefits from the government for doing so.

Additionally, if one has a relatively low income, and has been in Canada for a short amount of time (less than 183 days), they may be exempt from filing a tax return.

What are the benefits of filing a tax return? Deductions, Benefits, and Credits

There are multiple advantages to filing a tax return. Apart from legally declaring your income there are also tax credits, benefits and deductions, and refunds that filers may be eligible for, which can reduce the amount of tax that one pays.

For example, federal programs like the Canada Worker Benefit, Canada Child Benefit, and the Climate Action Incentive (among others) are available to all eligible tax filers and can help reduce the amount of tax a person owes. In addition, provinces have a variety of benefits and credits for residents that can also be availed, and which reduce the amount of money eligible filers pay in tax.

Finally (as mentioned previous) a tax refund is available for those who may have overpaid on their taxes during the year, or for those with more modest incomes during the tax year.

What do I need when filing my taxes?

Aside from basic information like legal name, address, etc. you will need the following to file your taxes:

• Social Insurance Number (SIN): A SIN is a 9-digit number, that is given when someone is registered in Service Canada’s system. A SIN is required to work in Canada, and to access government programs and benefits. If one does not have a SIN, it is recommended that they still file their income tax with an added letter explaining the absence, in order to avoid late penalties;

• Newcomers to Canada who have recently arrived may need to provide prior employment and income information, before arriving in Canada; and

• Details of any dependents (spouses, children, elderly parents).

In addition, the following documents may be required depending on one’s situation:

• If already employed in Canada, one will need to include their T4 slips. T4 slips are income statements for the previous year, and are issued by employers to employees in advance of tax season;

• Entrepreneurs and business owners need to show income earned and expenses paid by their companies for the tax year;

• Medical expense receipts for the primary filer and any dependents, if one is planning to claim any benefit or tax deduction based on these expenses;

• Newcomers may need to declare foreign assets above $100,000 CAD in value; and

• Childcare expenses if one is trying to claim benefits for them.

How can I file my taxes in Canada?

There are multiple ways that one can do their taxes in Canada, including specific methods that are available to those with an invitation from CRA.

If one has not received an invitation, they may choose among the following methods to file their taxes:

• Certified tax software—The CRA approves certain tax software to help filers calculate and report their incomes. This process is completely electronic and can be done through a variety of certified options. These services are available to all, with varying costs depending on software used. The typical processing time is roughly two weeks;

• Authorize a representative—Filers also have the option of authorizing a representative to aid them. This can be family member, friend, or accountant that can act on a filer’s behalf to complete their taxes. This service is open to anyone, with varying costs, and carries a processing time of roughly two weeks. Note as well that there is a process for representative authorization that must be observed before using this method;

• Community volunteer tax clinics—People with modest income, or a simple tax situation can look for community volunteer tax clinics. There are available across Canada and are free to use. The processing time for this procedure remains around two weeks;

• Discounter / Tax Preparer—A discounter or tax preparer is an individual who calculates the refund that a tax filer is eligible for and pays them a discounted tax refund immediately (before the tax return is filed). The process is available to everyone with varying costs depending on a professional’s rates. The advantage of this method is that there is no processing time for a tax refund, however discounters; and

• Paper tax return—The final, and oldest method is to file a paper tax return. This is done manually and involves mailing your tax papers to CRA. While there is no cost associated with this method, processing times can be longer here, with a standard of 8 weeks if returns are posted on time.

About CanadaVisa and Cohen Immigration Law

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