Filing Taxes in Canada: Essential Tips for Newcomers

Canada has a progressive tax system, meaning your income is taxed at different rates depending on how much you earn.

The Canada Revenue Agency (CRA) administers tax laws for the Government of Canada and most provinces and territories. It also administers social and economic benefits and incentive programs from the tax system.         

Whether you’ve recently arrived in Canada as a permanent resident, temporary worker, or international student, understanding how to file taxes is essential for accessing government benefits and complying with Canadian laws.

Taxes are mandatory payments made to the government. The government uses taxes to support the programs and services it offers, such as education or health care.

In Canada, taxes are collected by the federal, provincial, territorial, and municipal (local) levels of government. The amount of income tax you pay depends on your income and the tax credits you claim.

There are fundamentals about Canada’s income tax system to familiarize yourself with before you file. Canada’s income tax season is in March and April. Here are things you should know.

Filing your taxes

It would help if you considered registering for CRA My Account, an online portal where you can view your tax information and receive information from the CRA.

You can file your taxes electronically using certified tax software, which sends your completed return directly to the CRA. The processing usually takes two weeks.

You can also file manually using a paper return. Mail your completed return by mail to your tax centre. It usually takes eight or more weeks to process.

Review the eligibility criteria on the CRA website to determine if you have a modest income or a simple tax situation. You may be able to get your taxes done at a free tax clinic.

Modest income requirements may vary at each tax clinic. For more information, check with the community organization hosting the free tax clinic.

You need a Social Insurance Number (SIN) to file your tax return. It would help if you had a T4 slip, a summary of your income and deductions, receipts, and records of expenses with supporting documentation.

You may have to provide proof of your arrival in Canada, such as your landing papers or visa.

Reasons to file a tax return

Income tax is one of the most common taxes in Canada. It helps pay for the government’s many programs and services.

In Canada, individuals file an income tax and benefit return every year to report their income for the year. They do their taxes to calculate the income tax they owe and find out if they are entitled to a refund or have a balance owed.

As a newcomer, you can handle your tax obligations independently, but there may be instances where seeking professional advice is beneficial. Complex tax situations, international income, or specific deductions and credits may require consulting a tax professional who can provide valuable guidance.

Find a trustworthy tax professional, such as a certified accountant or tax preparer, to assist you. Understanding key considerations, including qualifications, experience, and credentials, will help you choose the right professional to assist you with your tax needs.

Importance of record keeping

Maintaining accurate records is essential for a smooth tax filing process. Keep detailed records of your income, expenses, and supporting documents. Proper record-keeping can help you claim deductions and credits and accurately report your income.

As a newcomer, it’s crucial to retain important immigration and residency documents. We will highlight the significance of these documents in determining your tax residency status and eligibility for certain tax benefits. Keeping these records readily accessible will ensure compliance with tax regulations and facilitate accurate tax reporting.

Social programs and benefits

Your taxes and contributions help pay for the goods and services tax / harmonized sales tax (GST/HST). It helps individuals and families with low or modest incomes offset the GST or HST they pay.

It also pays for the Canada Child Benefit (CCB), a tax-free monthly payment that helps eligible families with the cost of raising children under 18.

Employment insurance (EI) benefits individuals who lose their jobs through no fault of their own and are available for and able to work but can’t find a job. This program also offers parental, sickness, and caregiving leave benefits.

You should do your taxes if you want to get a refund. You can also carry forward or transfer unused tuition credits, which will help you or the other person pay less tax.  You can earn a registered retirement savings plan (RRSP) contribution room, which means you can save more money in your RRSP account.

Meet deadline and ensure accuracy

Generally, you must do your taxes by April 30. If you do your taxes late and have a balance owing, you will be charged a late-filing penalty. You can avoid the penalty by doing your taxes by the due date, even if you cannot pay your balance in full.

Even small mistakes can lead to delays in receiving your Notice of Assessment (NOA), which is the document that confirms the status of your return and indicates whether you owe taxes or are due a refund. Make sure to double-check your return for accuracy before submitting it to the CRA. If you disagree with your assessment, you can request a reassessment or speak with a tax professional to resolve the issue.

As a newcomer to Canada, arming yourself with essential tax tips is crucial for your financial success. You can navigate the Canadian tax system by using strategies to reduce your tax burden, maintaining accurate records, and seeking professional advice when needed.

Navigating the Canadian tax system can seem daunting, but with the right knowledge and resources, you can fulfill your tax obligations and take advantage of available benefits. By understanding your tax residency status, knowing the basics of personal and provincial taxes, and familiarizing yourself with tax benefits and deadlines, you’ll be well-equipped to handle your taxes in Canada.