Do I Have to File a Tax Return In Canada?

“Do I really have to file a tax return in Canada?” While it may seem like a rhetorical question, not every adult living in Canada needs to file. Of course, non-filers are in the minority. Most of us have no choice but to gather our various tax slips and receipts and either log on to (insert preferred tax software here) or visit our accountant or other tax professional. This article will explain who needs to file and why you might want to, even if it’s not mandatory.

Situations When You Must File an Income Tax Return

There are several instances where you will have to file an income tax return, regardless of other factors. For example, if you’re going to pay taxes, you need to file a tax return. If any of the following situations apply to you, you will have to file an income tax return:

1. If you are going to owe tax to the CRA.

2. You wish to split pension income with your spouse/partner

3. You’re scheduled to make repayment under the Homebuyer’s Plan (HBP) or Lifelong Learning Plan (LLP).

4. If you disposed of capital property, including your principal residence.

5. You are self-employed and have to make Canada Pension Plan (CPP) or Employment Insurance (EI) premium payments.

6. You have to repay Old Age Security (OAS) or EI benefits.

7. The CRA has sent you a Request to File or a Demand to File.

Reasons to File An Income Tax Return

Even if you’re not required to file a tax return, there are benefits to doing so. Let’s take a closer look at some reasons why you should file your taxes.

1. You want to claim a tax refund. If you work a low-paying, part-time job, your employer is still required to withhold income taxes from your paycheque, even if you won’t have to pay tax. But you can’t claim an income tax refund (and get your money back)unless you file your taxes.

2. You want to accumulate RRSP contribution room. Not many teenagers are thinking about their retirement, but you can help your child start collecting RRSP contribution room by assisting them to prepare a tax return, even if they aren’t required to file or won’t have to pay tax.

3. You want to receive various government benefits. Parents who wish to receive the Canada Child Benefit (CCB) must file a personal income tax return because the Canada Revenue Agency (CRA) uses your previous year’s income to determine your benefit amount. The GST/HST Credit is another example of an income-tested government benefit.

4. You want to receive the Guaranteed Income Supplement (GIS). Low-income seniors may be eligible to receive an additional benefit on top of their monthly OAS payments. The GIS is another income-tested payment like the CCB mentioned above.

5. You want to declare eligible tuition fees. Post-secondary students can report the amounts they paid towards tuition on their tax returns. This way, they can claim them, carryforward to a future year, or transfer them. The bottom line is that you must report tuition fees on your current year’s tax return to use them now or in the future.

How Do I File a Tax Return?

If you’re filing your first tax return this year, there are several ways to do it. You can deal with a professional tax preparer, like an accountant or H&R Block, who can take the guesswork out of income tax filing. But these days, more and more Canadians are choosing to file independently, using online tax return software.

Tax software has become so intuitive and easy to use that it can handle most situations, including self-employment income, rental property, and investment income. TurboTax and Wealthsimple Tax are good examples of leading tax software or check out our list of the best free tax software options for Canadians.

Final Thoughts on Filing a Tax Return In Canada

According to the Canada Revenue Agency (CRA), you may have to file your taxes in Canada even if you’re not a permanent resident. Examples include international students studying in Canada, seasonal workers, and non-residents of Canada with rental income.

Whether you’re a permanent or temporary resident, you should take the time to find out if you need to file personal income tax. Even if you don’t, it could still be beneficial down the road. I recommend contacting a tax professional or visiting the CRA website for more information.