Filing your taxes each year can sometimes feel like a chore. But it’s an important part of your financial year. If you’re eligible for a refund, the sooner you file, the sooner you’ll be able to access your refund to help you with your financial goals. You’ll also always know where you stand for contribution room to your RRSP and TFSA accounts, and have peace of mind knowing this responsibility is taken care of.
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Why should you file your taxes?
If you live in Canada, then chances are tax filing is an obligation. But beyond being something you must do, there are many reasons why filing your tax return each year can help your life.
Consider these reasons to file your taxes:
- You owe tax or want to receive a refund – If you are a resident of Canada for part or all of a tax year, you must file a tax return if you owe tax or want to receive a refund. If you owe tax, you should file on time to avoid late fees.
- To confirm eligibility for refundable tax credits or other benefits – Refundable tax credits include the GST/HST Credit, or the Canada Workers Benefit. If you don’t file a return, you won’t be able to confirm your eligibility for credits like these. The CRA also relies on information from your tax return to confirm eligibility for benefits such as the Canada Child Benefit (CCB) or the Climate Action Incentive. If you receive the Old Age Security (OAS) pension, your tax return confirms whether your income level will reduce the amount of the payments you receive.
- To recover any tax you overpaid from your paycheque – It’s possible you may have had too much tax deducted from your pay cheque and not benefited from all the deductions and tax credits you were entitled to. Filing your taxes can correct this and get your money back.
- To establish contribution room in an RRSP – If you have earned income (from a job, for example), that means you can make contributions to a Registered Retirement Savings Plan (RRSP). This is an account you can use to save or invest for your retirement. RRSP contributions are tax deductible, which means they can reduce your taxes owing or add to your refund. If you don’t use your contribution room in any year, you can carry the unused amounts to future years.
- You might be eligible for the Canada Learning Bond for your child’s education savings – If your income is low or moderate, you may be eligible for additional Canada Education Savings Grant (CESG) support as well as the Canada Learning Bond (CLB), which is a government grant added to your RESP. Filing your tax return will help determine your eligibility based on your income level.
- Peace of mind – Staying up to date on filing your taxes is an important step in keeping your finances in order. If a crisis hits, this will be one less thing you or your family will need to worry about.
What documents do you need to file your taxes?
Tax filing involves being ready with information about:
- Your personal identity – Social Insurance Number (SIN) and date of birth for you, your spouse and any dependents are necessary for filing your return. You should also ensure your mailing address and direct deposit banking information are up to date.
- Your income from all sources – This means collecting income tax slips such as those for employment or self-employment income, retirement income, investment income or interest from savings, or income from employment benefits or social assistance.
- Your receipts relating to credits and deductions – There are many types of deductions, credits, and expenses you can claim on your tax return. These can either reduce your taxes owing (for non-refundable credits) or add to your potential refund (for refundable credits). Examples of deductions include charitable donations, RRSP contributions, moving expenses, union dues, and more. You’ll need your receipts handy to claim these.
- Your previous year’s tax return – You may need to refer to last year’s tax return when filing for the current year. Have your notice of assessment and tax return on hand from the previous year. This will be useful for such information as your RRSP deduction limit, or tuition carry forward amounts. You may also be asked to refer to specific lines of your previous year’s return.
Being prepared with the right documents and information can make the actual tax filing steps feel a lot easier. It’s a good idea to get into the habit of saving all documents from the same tax year in one place — a paper envelope, digital folder, or file box.
If you are self-employed or own a business, your tax filing steps will look different. Learn more about support available for Canadians who are self-employed or own a small business.
How do you file taxes in Canada?
The tax filing deadline in Canada is April 30 each year. The earliest day you can file your taxes online is usually in late February. You file your tax return with the Canada Revenue Agency (CRA), who will then process your return and send you a notice of assessment.
There are a few different ways you can file your taxes:
- Online filing with certified tax software – There are several online tax services that use NETFILE, an electronic tax filing software that lets you send your tax return directly to the CRA. Filing with NETFILE allows you to receive your refund with direct deposit, and you’ll get immediate confirmation that your tax return has been received by the CRA.
- Paper filing via mail – You can still file your tax by filling in and mailing a paper return if you prefer. You can get your tax return package online or by mail. Filing your return on paper may take longer to process than an online return.
- Filing with a free Community Volunteer Income Tax Program (CVITP) clinic – If you have a modest income and a simple tax situation, you may be eligible to file with a community tax clinic in your area. The clinic might be walk-in, drop-off, virtual, or in person. Learn more about finding a free community tax clinic.
- Authorize a representative to file on your behalf – You can authorize a family member, friend, or accountant to act on your behalf to complete your taxes and access your tax accounts. Learn more about authorizing a representative.
- File with a discounter – A discounter is a tax preparer who immediately pays you part of your refund before filing your tax return with the CRA. Discounters charge fees that are deducted from your refund. Learn more about discounters.
If you are working with someone to file your taxes for you, make sure you know what fees they are charging before you enter into the transaction. There may be free alternatives available in your area.
What happens after you file your taxes?
After you file your return, there are just a few more steps to follow:
- If you owe taxes, ensure you pay them on time to avoid fees or late penalties. If you are receiving a refund, you can usually expect it within two to eight weeks.
- Review your notice of assessment when you receive it, in case anything has changed since your return was processed. It may be that your tax owing or refund amount has changed. You might need to pay or repay money.
- If you discover you need to change your return, ensure you wait until you receive your notice of assessment. Do not file a new return.
- You may receive a letter from the CRA saying your tax return is being reviewed or audited. The faster you’re able to respond and provide the information they need, the better.
- Save your notice of assessment, tax return, and tax slips in a common folder, file, or envelope in case you need to refer to them later.
There are many good reasons to file your taxes each year. You can file taxes online, by mail, or in person. You might get a refund that you can save, spend, or invest to help your goals. It’s a good idea to:
- Prepare for tax filing by collecting your receipts for all your sources of income, and expense deductions, as well as your tax return from the previous year.
- If you authorize someone to file your taxes on your behalf, make sure you know what fees they may be charging you before proceeding.
- After you file your taxes, make sure you pay any taxes owing on time.
- Keep your notice of assessment with the rest of your tax documents for the year.