As you know, Canada is the second-largest country by land area, which is popular for its stable economy and the high demand for skilled professional accountants with competitive salaries. When you start earning income, you may need to file Canadian tax return. Individuals may be required or choose to file a return depending on their circumstances, such as owing tax, being requested by the CRA, or claiming refunds and benefits.
This helps them to fulfil legal aspects and make them eligible for a tax refund or government benefits. But do you know how to file Canadian tax return? If not, then in this blog, we will help you learn the way to file Canadian tax return in detail.
What is a Canadian Tax Return?
A Canadian tax return is an annual report that is filed with the CRA to report the income, determine refunds and calculate taxes. Filing a tax return is required for individuals and corporations whose income or circumstances meet CRA criteria. Its main purposes are to report your income, calculate taxes owed, determine eligibility for benefits & credits and ensure compliance with Canadian tax law. It is important to know that not everyone must file a tax return. If you meet certain CRA conditions, then you have to file a tax return.
Why do You Need to File Canadian Tax Return?
Filing a Canadian tax return is a mandatory annual process for individuals and corporations that meet specific criteria set by the CRA. The percentage or the amount of taxes depends on the total income of a taxpayer. Below, we are providing a list of the purposes of filing a Canadian tax return.
- Fund for Public Services: The Canadian government uses the tax amount for public services such as healthcare, schools, colleges, etc.
- Get the Credits and Benefits: After filing the T1 form, you get many tax-free benefits and credit payments, such as GST/HST, CCB, CCR, GIS, CWB.
- Fulfill Legal Compliance: Filing a Canadian tax return is a mandatory annual process that fulfills the legal obligation and helps to avoid expensive penalties and interest charges.
- Claim Refund: If excess tax is deducted from your paycheques or from other income sources in Canada, then you can get the money back by filing a Canadian tax return.
Process To File Canadian Tax Return
Before we file our tax return, we need to know some important things that we discussed in detail below.
1. Who Should File Canadian Tax Return
Generally, in Canada, you are legally required to file a tax return if you owe tax to the Canada Revenue Agency. At that time, you can file Canadian tax return. Below, we provide a list of taxpayers who should file a tax return.
- If your income is generated from employment, investments, and other income sources, and you owe tax to the CRA.
- If you are considered a resident of Canada for tax purposes or have Canadian source income, you may be required to file Canadian tax return, regardless of citizenship or student status.
- Self-employed individuals who owe the Canada Pension Plan (CPP).
- When you receive a request from CRA to file Canadian tax return.
2. Information Needed to File Canadian Tax Return
To make the process of filing a Canadian tax return smooth, you need some information that we discuss below.
- You need either a Social Insurance Number (SIN) or an Individual Tax Number (ITN), depending on your residency status and eligibility.
- Then you need a copy of a notice of assessment that the Canada Revenue Agency sends to you.
- Then you must have your bank details, such as institution number, account number, and transit number.
- After that, you need the personal information such as income, marital status, and dependents.
3. Fees for Filing a Canadian Tax Return in Canada
CRA can’t charge any amount to file a tax return in Canada, but if you are not able to file a Canadian tax return yourself, then you can hire Professional Tax Preparers. They charge approximately CAD 50 to CAD 75 to file a Canadian tax return, which depends on the complexity of your return. That may increase as per the situation.
4. Steps to File a Canadian Tax Return
To file a Canadian tax return, you need to follow some steps, which we have given below.
- First, you need to organise all the necessary Documents, such as employment income (T4), investment income (T5), and other documents and receipts for the income that you get during the year.
- If you are a self-employed person, then you need to organise all your work records or your business records.
- You can file your tax return using CRA-certified tax software (NETFILE), paper forms, or through a professional tax preparer.
- Then just fill out the Canadian tax return form by adding information on all your income and deductions.
- If you have not paid enough taxes, then you need to pay the owed taxes to CRA through your financial institution, online, or by email.
- After the tax return is completed or filed, CRA sends you a notice of assessment where the taxes owed or refunds due are mentioned.
5. Avoid Some Common Mistakes
When you work in a new field, some common mistakes may occur, such as some people making mistakes during filing a Canadian tax return, which we have listed below.
- Missing out on eligible deductions and tax credits.
- Incorrect reporting of income.
- Choosing the wrong marital status.
- Simple calculation mistakes on paper forms.
- Missing the tax deadline.
Conclusion
After reading this article, you can conclude that not everyone can fill out a Canadian tax return or T1. But the answer to your question is too simple. Basically, you need to arrange your income documents and other necessary records to file a Canadian tax return. After you file, the CRA will issue a Notice of Assessment. In this article, you can discover detailed information on filing a Canadian tax return. We hope this article will help you find the solution to your question.