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Who has to pay tax in Canada?
As a Canadian resident, you must report your income from all sources, both inside and outside Canada.
Federal and Provincial Personal Income Tax
Residents of Canada are subject to Canadian income tax on their world income. World income includes employment income, income from self-employment, income from investments (including rental income), taxable capital gains and a number of additional miscellaneous sources of income.
Ontario residents submit his or her federal and provincial taxes together, on the same income tax return, which is due April 30 (June 15 if self-employed or the spouse of a self-employed) following each calendar year. Quarterly installments of income tax are required in some circumstances. Canada Customs and Revenue Agency will advise on these circumstances on an individual basis.
To file your income tax, you have to gather all the documents needed to complete your return. This includes your information slips (such as T3, T4, T4A, and T5 slips) and receipts for any deductions or credits you plan to claim. If you make a claim without the required receipt, certificate, schedule or form, your claim may be disallowed.
You should also keep a copy of your previous year's return, the related Notice of Assessment, and any Notice of Reassessment. These can help you complete your current year's return with information including:
- your current year's RRSP deduction limit;
- your unused RRSP contributions for the current year;
- your non-capital loss carry-forward balance; and
- your tuition and education amounts carry-forward balance
Why should I file if I don’t have any income tax to pay?
If you have to pay tax or have earnings on which CPP contributions must be paid, you must file a tax return. You must include your worldwide earnings in your taxable income. You will usually have to pay tax if your taxable income exceeds the amount of the basic personal exemption. If you have net self-employment income or pensionable employment income in excess of $3,500, you may have to remit CPP contributions.
There are other circumstances which also may require a tax return to be filed:
- You were requested by the Canada Revenue Agency (CRA) to file a return.
- You have disposed of capital property (real estate or investments, for example) during the tax year.
- You claimed a capital gains reserve on your previous year's tax return.
- You have withdrawn amounts from your RRSP under the Home Buyer’s Plan or the Lifelong Learning Plan, and have not yet repaid the entire amount.
Even if you are not required to file a tax return, it will often be to your advantage to do so, for some of the following reasons:
- You have had tax withheld from your income, and want to receive a refund.
- Some provinces have refundable tax credits, which are payable to you even if you have no earnings and have paid no tax. This means they will send you a cheque for the tax credit!
- You want to apply for the GST/HST credit - If you are 18 years of age or older, you should file a tax return even if you have no income, in order to apply for the GST credit. You must be 19 to receive the credit, but if you will turn 19 before April 1 of the following year, you should apply now so that you will receive your first GST payment as soon as possible after you turn 19. Some provinces have benefits similar to the GST credit. By filing your tax return, you are applying for these benefits.
- You want to apply for the Canada Child Tax Benefit - In order to receive or continue to receive Canada Child Tax Benefit (CCTB) payments for your children, you and your spouse must both file tax returns. CCTB payments are non-taxable monthly payments made to eligible families with children under age 18. To learn more about the CCTB, visit the CRA web site CCTB page. Many provinces and territories also pay benefits to families with children. By applying for the CCTB and filing your annual tax returns, you will be eligible to receive these benefits.
- You have “earned income” for RRSP purposes. Even if you do not wish to contribute to an RRSP currently, the earned income amounts can be carried forward indefinitely. Also, you can contribute to an RRSP, up to $2,000 more than your RRSP deduction limit, and wait until a future year (when you are making higher income) to deduct the contribution. This gives your retirement fund an early start.
- For seniors who are receiving the GIS (Guaranteed Income Supplement), filing of their annual income tax return automatically renews the GIS.
- You have a non-capital loss, which you can carry back to prior years or carry forward to future tax years.
- You have unused tuition, education and textbook amounts that you would like to carry forward to use in the future.