For first-timers, sometimes it’s tricky when you’re starting a job in Canada. Tax laws change all the time and that’s probably not something you’re going to keep an eye on.
Having said that, it’s also something that can have an effect on your tax situation, and it’s important to get it right from the beginning.
That’s why we’ve teamed up with Taxback.com to give you 5 simple tips for starting a job in Canada.
Tip 1: Understand the documents before starting a job in Canada
TD1: This is your Personal Tax Credits Return. It is used by payroll to determine your tax credits and deductions. Your employer may ask you to complete a federal TD1 and a provincial TD1 before starting a job in Canada. It’s vital you fill in this document correctly, so read it carefully before signing your name at the bottom!
Sometimes larger employers will prefill these documents for you. If Tip 2 and/or Tip 3 sound familiar, you should update these documents. Your TD1 can be updated at any time of the year.
A T4 is a summary document that shows how much income you earned and how much tax that was deducted in a tax year. In Canada the tax year runs from January 1st to December 31st, like the calendar year.
You will receive your T4 from each of your employers in February. You will use the figures on this document to file your tax return, so keep it safe.
Tip 2: Working multiple jobs at the same time
If you’re working two or more jobs at the same time, make sure you’re not claiming tax credits on both incomes. Only claim this for one job to avoid underpaying tax throughout the year.
You can check and update what you are currently claiming on your TD1 forms at any time.
Tip 3: Eligibility and claiming tax credits
As a non-resident, foreign income can affect your eligibility to claim the personal tax credit amount.
In order to check if you are eligible, you should calculate what you have earned in the tax year before coming to Canada, and compare this to the approximate income that you will earn in Canada in the same tax year. If your foreign income is more than 10% of your total income for that year, you shouldn’t claim the personal tax amount on the TD1 form.
E.g. you worked in your home country from January 1st to October 31st. You were then starting a job in Canada in mid-November. In order for you to claim the personal tax credits, the income you earn from November to December will have to represent 90% of your income for the year. If that is not the case, you cannot claim the credits.
It’s better to end up with a refund at the end of the year, than owing tax!
So if you worked in another country in the same tax year (January 1st – December 31st) – just put $0 on both the federal and provincial TD1 form.
Tip 4: Maximizing your refund
Once you earn over the tax-free threshold, you can include expenses such as medical, dental and transport in your tax return. Keep receipts safe until it’s time to file.
The federal tax-free threshold for 2016 is $11,474. This will likely increase in 2017.
Tip 5: Filing your tax return
File your 2016 tax return before May 1st 2017 to avoid any late filing penalties or charges. As a non-resident and first time filer, you will have to file your tax return on paper as electronic filing is for tax residents only. Be prepared that it may take up to 16 weeks for the CRA to process your return.
Getting help with your tax return
If you don’t want to file your own tax return, we recommend using Taxback.com. They specialize in helping international workers file taxes in Canada, and their average refund is $904. Taxback.com offer free estimates, and international bank transfers, so that you can continue travelling and still receive your refund.