If your child doesn’t have a Social Insurance Number, it’s virtually impossible to file a return. That’s why obtaining one is critical. James Collins, a chartered professional accountant in Toronto, says, “It’s a good idea for parents to apply for a Social Insurance Number as soon as their child is born. That way, parents aren’t left scrambling later on when their son or daughter gets their first job.”
Applying for a SIN
If your child intends to work in Canada someday, it makes a lot of sense to apply for a SIN. There’s no reason not to apply – it’s free. If you live in Alberta, British Columbia, Manitoba, New Brunswick, Newfoundland and Labrador, Nova Scotia, Ontario, Prince Edward Island or Quebec, you can expedite your child’s application for a SIN with the Newborn Registration Service. Your child won’t be able file his income tax return later on without one.
Why Should Your Child File a Tax Return?
Without a SIN, your child won’t be able to file his income tax return and collect tax credits. Even if your child didn’t earn any income, it makes sense for him to file a return. Here’s why: although he may not be able to take advantage of nonrefundable tax credits like the basic personal amount, there are other refundable tax credits he may be able to obtain. If he turns 19 before April, he’ll qualify for the GST/HST credit.
If you’d like to lend your child a helping hand saving towards his education, a Registered Education Savings Plan is a great way to do just that. Unfortunately, you won’t be able to open an RESP if your child doesn’t have a SIN. He also won’t be able to receive other education funds from the government like the Canada Learning Bond or the Canada Education Savings Grant.
What Your Child Should Know
If you child has earned income, he must file a tax return. But before he can work, he must have a SIN. Some common tax deductions missed by young people are charitable donations, medical expenses and transit passes. If your child plans to move away to attend college or university, not only could he claim moving expenses, if he lives in a student residence, he might be able to claim student rent, depending on the province where he goes to school. Speaking of school, your child can also claim a tax credit for tuition and textbooks. If he isn’t able to fully use it, he can transfer it to you. Again, your child must have a SIN to take advantage. Without one, those tax credits will go to waste.
Non-Residents Can File, Too
If your child is considered a non-resident, he can still file a tax return, but he’ll need an Individual Tax Number. Your child doesn’t need an ITN if he’s able to obtain a SIN. If he’s applying for an ITN for the first time, he’ll need to fill out T1261 Application for a Canada Revenue Agency Individual Tax Number for Non-Residents. Why would you want to file this form? Your child can apply to waive or reduce Canadian withholding tax on any income he earns. If he’s an international student going to college or university in Canada, for example, he could file a tax return with an ITN and receive a tuition deduction.
References & Resources
- Canada Revenue Agency: T1261 Application for a Canada Revenue Agency Individual Tax Number (ITN) for Non-Residents
- The Globe and Mail: Free Money: Why young adults should file tax returns
- Service Canada: Social Insurance Number
- James Collins, chartered professional accountant; Invesco; Toronto, Ontario
- Ryan McVay/Digital Vision/Getty Images