Are you about to file your taxes for the first time? Whether you decide to complete your tax return yourself or have it prepared by an expert, there are several important basics to know. Here are a few.
Why do you pay ataxes
Because it’s mandatory. In Canada, taxes pay for services we all benefit from, such as hospitals, schools, and roads, but also for social programs like employment insurance and child support. You may not have to pay any taxes below a certain annual income. But it’s to your advantage to file a tax return because you could receive money or benefit from tax advantages offered by different levels of government. If you have a job, chances are your employer is already withholding tax from your paycheck. If they’ve withheld too much during the year, you can only get that money back by filing a tax return. Learn how to budget to manage a potential refund .
When do you have to file your taxes?
Every year. If you’re an employee, the deadline to file your tax return and pay any amounts you owe the government, if any, is April 30. Self-employed workers generally have until June 15.
What do you need to declare?
You must declare all your income. Here are examples of sources of income you must declare:
Employment and self-employment income
You must declare all amounts paid by your employer or received as a self-employed person, even if these amounts were earned abroad.
If you are an employee, your employment income is shown on the T4 slip that your employer must send you.
If you worked on a contract basis as a self-employed person, each of your clients must provide you with a T4A slip as soon as the payments exceed $500.
Registered Education Savings Plan and Scholarships
If you are a student and you or your parents withdraw money from a Registered Education Savings Plan (RESP), this amount, called an Educational Assistance Payment (EAP), must be reported on your tax return, not your parents’. This income will be reported on the T4A slip (and the Relevé 1 in Quebec) and is taxable.
If you received scholarships,t hey must also be reported as income. You will also receive T4A slips or Relevé 1 slips for these amounts, which are generally tax-deductible under certain conditions.
Investment income
Do you have investments? Interest and dividends from them must also be declared, as they are considered income. If you don’t have any investments, it’s never too late to start saving.
How do tax brackets work?
True or false Can you pay less tax?
True. There are two main ways to pay less tax: tax credits and deductions.
Tax credits
Tax credits are tax measures that governments implement to help a segment of the population or an economic sector. They do not reduce your taxable income, but rather reduce the tax owed.
If the sum of your tax credits is higher than what you have to pay to the government, you will have a positive balance and will therefore receive money under certain conditions.
There are actually several tax credits ,and you can find out about them on the Canada Revenue Agency website. You will see that there are measures to help students such as the tuition fee credit or the student loan interest credit .Others help workers, such as the Canada Employment Amount , hich aims to encourage employees.
Deductions
In the case of a deduction, you must have incurred an expense and provide a receipt or invoice as proof. This expense is what you must enter on your tax return and which reduces your taxable income.
For example, if you are an adult and you return to school to complete your basic education (primary or secondary), you could deduct your tuition fees.
Please note that you may also be able to obtain deductions, under certain conditions, for your scholarships , yur moving expenses and ,your contributions to an RRSP or a TFSA .
Hw to prepare to file your tax return in Canada?
Gather all your documents and keep them safe.
You’ll receive some documents by mail, while others will arrive electronically. Whether you or an accountant files your tax return, keep them,itsupporting documents may be requested by revenue agencies up to six years after you file your return.
Here are some other useful documents for your taxes:
- invoices for study-related expenses
- moving bills
- receipts for charitable donations
- medical expense receipts
If you are self-employed, you may also be able to deduct your work-related expenses. Learn more about the specifics of taxes for self-employed workersÂ
Update your information and sign up for direct deposit
To facilitate your declaration process:
- Update your personal information  th federal and provincial government authorities.
- Sign up for direct deposit to receive your payments faster.
Use the right resources.
- Software and Web Applications
Want to complete your tax return yourself? There are software and web applications to guide you through every step. Some of these tools even ask you questions to determine which credits or deductions you’re entitled to. All calculations are done automatically.
- Government Tools
The various levels of government provide you with a wealth of information and resources. On the Canada Revenue Agency website, you can find a page dedicated to tax returns with all the useful links to help you. - Specialists
Some schools and community organizations offer tax workshops where volunteers can help you and answer your questions. You can also contact a specialist, such as an accountant, who will prepare and submit your return for you.
You’ll have to file tax returns every year for the rest of your life. Learn how it works now and develop good habits!
