Living in Québec and working in Ontario: what are the tax implications of this situation?

By Rob Cosman, Partner, Jones & Cosman Chartered Professional Accountants

If you are a resident of Québec but work in Ontario, you must file a tax return (TP1) with Revenu Québec. It is important to know your residency status, and how to report employment income depending on where you earned it.

Determining your residency status

For tax purposes, your residency status is based on where you resided on the last day of the tax year for which you are filing. As a result, if you lived in Québec on December 31, you must file a tax return with Revenu Québec. However, if you lived in Ontario on that day, you do not need to file in Québec.

If you moved to Québec during the year, your residency status on the last day of the year determines where to file your return, regardless of how many days you have been living in Québec. For example, imagine that you lived in Ontario for most of the tax year. However, you moved to Québec in December and resided there on the last day of December. In this case, although you only lived in Québec for a short time, you must still file your return with Revenu Québec.

Reporting Employment Income Earned Outside of Québec

If you earned employment income outside of Québec, you must enter that income on line 101 of your provincial tax return (TP-1) along with any employment income earned in Québec. In most cases, you use information from RL-1 or RL-25 slips to complete this line, but if your employer is based in Ontario, it will likely give you a T4 slip. This slip has all the details you need.

Checkmark box 95 to indicate you earned your income outside of Québec but inside of Canada. If you have earned money outside Canada, you must check box 94 of your Québec income tax return.

Reporting Other Employment Income Earned in Ontario

If you have other employment income earned in Ontario, you must note that on line 107 of your Revenu Québec tax return. This includes tips that were not noted on your T4 slip, as well as wage loss replacement benefits and GST rebates.

Reporting Self-Employment or Business Income Earned in Ontario

Similarly, if you run a business in Ontario, you also have to report those earnings on the TP-1 you submit to Revenu Québec. Complete Schedule L for each of your businesses, note your total business income on line 164 of your return, and check box 403 to indicate you earned business income outside of Québec.

Then complete Form TP-22 Income Tax Payable by an Individual Who Carries On a Business in Canada, Outside Québec. This form prompts you for information on which portion of your business income was earned inside Québec and which portion was earned outside of Québec in Ontario, another province or another country. The form also requests information on deductions claimed for foreign researchers, experts and professors as well as figures related to employment income earned outside of Canada.

Using a range of numbers pulled from various parts of your provincial tax return, this form helps you determine how much income tax you owe in Québec.

Completing Schedule R

As a resident of Québec, you must complete Schedule R, Section B, if you worked or ran a business in Ontario or any other province in Canada. This schedule helps you determine whether you owe premiums for the Québec Parental Insurance Plan.

To complete this form, you need your T4 and RL-1 slips. The schedule guides you through some basic calculations to determine your premium. If you owe a premium, you note the amount on line 439 of your Québec TP1 return.

Transferring Income Tax Withheld in Ontario

If you work in Ontario, your employer may have withheld Federal income tax from your paycheque as if you were a resident of Ontario. Luckily, you can claim a credit worth up to 45 percent of the withheld tax. You can claim this credit when you file your federal and Québec income tax returns (TP-1).

To start, grab your T4 slip and find the amount of income tax deducted. It appears in box 22 of your T4. Enter this amount on line 43700 of your federal income tax return. Calculate up to 45% of the amount on line 43700 and then enter the result on line 43800. Finally, transfer that amount to line 454 of the return you submit to Revenu Québec.

For example, Rachael lives in Québec but works in Ontario. She receives a T4 reporting that her employer withheld $5,000 in income tax. 45% of this amount is $ 2,250. She can therefore claim this credit on the tax return she submits to Revenu Québec (TP-1). This is considered a refundable tax credit.

• If she doesn't owe taxes to Revenue Quebec, she can receive a refund of $2,250
• If she owes taxes to Revenue Quebec, she reduces the amount by $2,250; ie. if she owes $1,500 in taxes, she can receive a refund of $750.

FAQ

When will I receive my RL-1 and T4 Records of Employment?

• RL-1 (provincial statement): Employers have until the last day of February of the year following the year covered by the statements to send it to you.
• T4 (federal statement): This rule applies here too. Employers must send you your T4 by the last day of February.

When is the deadline for filing my tax returns?

At both the federal and provincial levels, you have until April 30 of the year following the tax year to file your tax return and pay any amounts owed, if applicable. Self-employed workers also have until April 30 to pay their taxes, although they have until June 15 to file their tax returns.

How do I submit my tax returns?

In Québec, the most convenient way to submit your federal and provincial income tax returns is to do so online through NetFile Québec.

Which TurboTax Is Best for You?

Figuring out all these specifics can be stressful. But doing your income taxes doesn't need to be, when you use TurboTax Online.

However, if you do feel a bit overwhelmed, consider TurboTax Live Assist & Review and get unlimited help and advice from a real person as you do your taxes. Plus, there's a final review before you file.

Learn more