If you’re like most people, you don’t get too excited about preparing your Canadian tax return. But, what if we told you that you could be in line for a refund on your Canadian taxes? Your money — potentially a four-figure sum — could be sitting in government accounts, but it could and should be in yours!
To get your Canadian tax refund sooner rather than later, if indeed you are eligible for a refund, you should submit your Canadian tax return correctly and on time.
Get every dollar you deserve on your Canadian tax return
Deadline for filing Canadian income taxes
Canada’s income tax filing deadline is April 30. If you happen to owe taxes and you file after this date, you could incur a penalty fee of 5 percent on top of anything you may owe to the Canadian government.
Your residency status in Canada
Your tax obligations are typically determined by your residency status, so you need to know if you’re a resident or non-resident for tax filing purposes. When you’re sure of your status, you will be aware of your tax responsibilities.
There are a number of factors involved in determining your status, including your residential ties with Canada, length of stay, the purpose of your stay, and other factors.
For example, if you’re on a working holiday or studying in Canada, you’ll generally be classified as a ‘non-resident for tax purposes’. If you’re a permanent resident, residing in Canada, well that would likely mean you are a resident for tax purposes.
Are you an American living in Canada or considering a move? You may have tax obligations in both countries! Learn all about Canadian tax considerations for Americans here. We also have guides on the U.S.-Canada Tax Treaty, and your obligations for reporting on foreign accounts.
Your Social Insurance Number (SIN)
If you’re working in Canada, you should have a Social Insurance Number (SIN). When completing your Canadian tax return, enter your SIN on the first line of the “Information about you” area of the “Identification” section on page 1.
Your T4 document
To file your tax return in Canada, you’ll need your T4 or final cumulative payslip from your employer.
This is usually sent out to employees by the end of February at the latest. If you have different employers throughout the year, then make sure you get a T4 from each employer.
Your T4 a summary of the previous tax year, outlining how much income you earned, and how much tax you paid.
What tax am I paying in Canada?
Generally speaking, you’ll pay three types of tax: Income Tax, CPP (Canadian pension plan), and EI (employer insurance).
Workers in the province of Quebec pay into the QPP (Quebec Pension Plan) instead of the CPP.
Your T4 will show a breakdown of the amounts paid for each type of tax contribution.
You will find your income tax in box 22 of your T4 slip, CPP contributions in box 16, and EI in box 18.
In Canada you will only get a refund if you have overpaid any of these taxes. This can happen if your employer’s payroll overpays on taxes through the year — you then ‘settle up’ with the government when you file your taxes and they calculate how much you underpaid or overpaid in taxes through the previous year.
Quebec, once again, is a bit of an outlier here. While other workers in Canada submit only one tax return to the federal government, workers in Quebec must submit separate returns, one each to the federal and Quebec governments.
Deductions, credits, and expenses on your Canadian tax return
There’s a whole raft of deductions, credits, and expenses that workers in Canada may avail of come tax season.
You may be eligible to claim expenses, including:
- Medical (e.g. doctors’ visits, prescriptions, surgery)
- Travel (e.g. monthly transit passes)
- Business (e.g. rent, supplies, travel, professional fees)
Deductions can reduce your assessable income, and therefore your tax liability. Check out this complete set of Canada’s tax deductions, credits, and expenses.
And, if you have your own business, there are certain expenses you can deduct so keep your receipts!
The COVID effect
The dreaded ‘C’ word, yes.
Residents and non-residents alike can claim some benefits and income support due to the pandemic. That’s the good news. These programs include:
- the Canada Emergency Response Benefit (CERB, now closed)
- the Canada Recovery Benefit (CRB, also closed)
- the Canada Recovery Sickness Benefit (CRSB)
- the Canada Recovery Caregiving Benefit (CRCB)
The potentially bad news is that some of these programs are taxable, meaning you may owe some taxes after receiving them.
The Canada Revenue Agency has a whole section on these recovery benefits as they relate to tax.
When can you apply for a Canadian tax refund?
The Canadian tax year runs from January 1 to December 31 (so, that’s the entire calendar year), and the filing deadline for 2022 (i.e. for the 2021 tax year, because you pay taxes on last year’s income) is April 30. For example for the 2021 tax year you have to file before April 30, 2022 in order to avoid potential penalty and interest.
However, in case your result is a tax refund you have up to 10 years to file. If you worked in Canada in 2021, you can apply for your refund from February 2022. If you worked in Canada anytime from 2012-2021, you can also apply for your tax refund now.
How to submit your Canadian tax return
Non-residents are required to file their Canadian tax return by mail. Residents may choose either mail or an online method of filing their return.
Get help filing your Canadian tax return
Many workers in Canada go for the DIY (do-it-yourself) method of filing their tax return. Others, however, choose to get some help, typically from a qualified accountant or other dedicated tax professional.
Though an accountant or professional would charge a fee, the benefits of retaining such a person or organisation for help with filing your tax return are obvious. You can save time and potentially avoid stress, plus this person may be able to maximise your refund or, if you owe, point out efficient ways to minimise the amount owing.