Welcome to Canada!
We don’t have to tell you what makes Canada great as you have already put a lot of effort into making your move and starting a new life with your family and loved ones.
People have been immigrating to Canada for years and that’s what makes us such a wonderfully diverse and unique society. There’s lots to do and so much to discover, but one of the best ways to dive right into the culture is trying out some truly Canadian specialties such as maple syrup toffee, beaver tails and poutine!
As a new immigrant, your first year is undoubtedly the hardest as you are adapting to your new environment and learning new aspects of life. Filing taxes is right up there on the list of strange concepts for many – but don’t worry, that’s what we’re here for.
If you’ve recently relocated here, you might be slightly confused about how we file tax returns compared to other countries.
Let’s go over some quick Tax FAQs for newcomers to Canada.
Canada’s tax system is regulated by the Canada Revenue Agency, also called the CRA.
The deadline for filing your personal income tax return, called a T1, is April 30th.
The deadline for self-employed individuals to file their personal tax returns June 15th.
If April 30th, or June 15th fall out on a Saturday or Sunday, then the due date becomes the Monday, so for example, this year, June 15th is a Saturday, which means self-employed tax returns are due to the CRA by June 17th.
Self-employment income is income that is earned by individuals who work for themselves. All income earned this way is taxable and should be reported to the CRA. The only type of income that should not be reported this way is money earned through selling of items, such as, selling a jacket, or something you own to someone else. It only becomes taxable if it’s being done to earn income on a regular basis, so buying 50 jackets and selling them for a profit would be taxable.
1. Do I Need to File a Tax Return?
If you are considered to be a Resident of Canada, or a Deemed Resident of Canada (and some Non-Residents) you should file an income tax return for either the entire tax year or part of the tax year you’ve lived in Canada. You may not be required to, but you should, for the following reasons;
Benefits of Filing
One of the main benefits of filing your taxes is to receive a tax refund. The government will only pay out your tax refund if you file your tax return.
Any money that you get back as a refund is actually your money. A tax refund happens when the government sends you back all or part the taxes you’ve already paid because either you didn’t earn enough income during the year, or you paid too much taxes.
You can pay too much taxes when your employer takes too much taxes off of your pay cheque than they should have. That happens if they have you in the wrong tax bracket/tax slab, or when you are eligible for tax credits that lower the amount of taxes you owe.
If you’re 19 years old or older, you may also be eligible for a larger refund from refundable credits such as;
- Working Income Tax Benefit
- GST/HST credit
- Canada Child Benefit (CCB).
Students who pay tuition at a qualifying post-secondary institution can also benefit from filing their taxes, even if they have no tax refund. Unlike most non-refundable credits, tuition credits can be carried forward to a future year to use when you have earned more income and need the credit, or transferred to a spouse/common-law partner or parent/grandparent.
You Might Be Required to File
You must file a Canadian Personal Tax (T1) return for 2018 if:
- You have to pay tax for 2018.
- The CRA sent you a request to file a return.
- You and your spouse or common-law partner elected to split pension income for 2018.
- You received working income tax benefit advance payments in 2018.
- You disposed of capital property in 2018 (for example, if you sold real estate, your principal residence, or shares) or you realized a taxable capital gain (for example, if a mutual fund or trust attributed income to you, or you are reporting a capital gains reserve you claimed on your 2017 return).
- You have to repay any of your old age security (OAS) or employment insurance (EI) benefits.
- You have not repaid all amounts withdrawn from your registered retirement savings plan (RRSP) under the Home Buyers’ Plan or the Lifelong Learning Plan.
- You have to contribute to the Canada Pension Plan (CPP). This can apply if for 2018 the total of your net self-employment income and pensionable employment income is more than $3,000.
- You are paying employment insurance premiums on self-employment and other eligible earnings.
- You are a non-resident receiving certain types of Canadian source income.
As mentioned previously, even if none of these requirements apply, you should file a return if:
- You want to claim a refund.
- You want to claim the working income tax benefit for 2018.
- You want the goods and services tax/harmonized sales tax (GST/HST) credit (including any related provincial credits).
- You or your spouse/common-law partner want to begin or continue receiving Canada child benefit payments, including related provincial or territorial benefit payments.
- You have incurred a non-capital loss in 2018 that you want to be able to apply in other years.
- You want to transfer or carry forward to a future year the unused part of your tuition.
- You want to report income for which you could contribute to an RRSP and/or a pooled registered pension plan (PRPP) to keep your RRSP/PRPP deduction limit for future years current.
- You want to carry forward the unused investment tax credit on expenditures you incurred during the current year
- You receive the guaranteed income supplement or allowance benefits under the old age security program. You can usually renew your benefit by filing your return by April 30th. If you choose not to file a return, you will have to complete a renewal form. This form is available from Service Canada.
2. If I Don’t Have to File, Why Should I?
On top of the convenience of having your information set up with the Canada Revenue Agency (CRA) for future filings, one advantage of filing is that you may be entitled to other benefits.
As previously mentioned, these could include the GST/HST credit, as well as the Canada Child Benefit and other tax credits specific to the province or territory where you live.
Keep in mind, that the majority of benefits programs in Canada are income based, so your eligibility is determined by your annual income tax return (T1).
3. What Information Do I Need to File my Return?
Generally speaking, you’ll have to provide basic personal information such as your full legal name, your address, and all income from previous year, in addition to the following:
- Make sure to have applied for, and received, your Social Insurance Number (SIN) which is used to identify you for income tax and benefits.
- If you are already employed in Canada, you will need the information from the “T-Slips” you received from your employer. That slip is called a T4.
- If you have recently arrived in Canada you need to include information from your employment before arrive to Canada
- If you started a business in Canada, then you’ll need to provide business information including income earned and expenses paid
- If you had income from outside Canada since the day you relocated, you will need those numbers as well
- If you have foreign assets over $100,000, you will need to report them on form T1135 on your tax return.
- If you have dependants (such as a spouse, children, or elderly parents), you’ll have to provide all of their details too.
Credits and deductions you can claim depend on your own individual tax situation. For example, if you have childcare expenses, you may be eligible to claim those on your return. If you incurred medical expenses for yourself, your spouse, or your children, you may be able to claim those as well.
If you’re bringing any kind of assets to Canada, you would need to include details and market value on the day you arrive. Your capital gains or losses will be calculated based on this amount, if and when you sell them.
4. How Do I File my return?
As a new Canadian, you will have to print and mail your first income tax return to the CRA. Next year, and all following years, you will be able to file your income tax return electronically through NETFILE, and the great news is that Canadians use TurboTax to prepare their taxes because not only is TurboTax Canada’s most popular tax preparation software but it was created to guide you through the preparation of your tax return from start to filing (or printing and mailing) and your do not have to be a tax expert to use it.
All you have to do is answer simple questions about your life and the software will do all the heavy lifting for you, such as checking over 400 possible credits and deductions for you automatically. TurboTax lets you prepare your return confidently and accurately.