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Who's Required to File Taxes in Canada?

Written by Jessica Steer
Canadian income tax are one of things that comes around every year. Whether or not you have to pay taxes or will receive a refund depends on a few things. How you receive your income, if you are self employed vs an employee or what tax bracket you fall into. While pretty much everyone does their taxes, who is actually required to file a personal income tax return according to the income tax act?
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    What is the minimum income to file taxes in Canada?

    In Canada, there is no minimum income requirement in order to file your Canadian income taxes return. Once you start earning income of any kind then you need to start doing your taxes. That being said, how much income earned annually does dictate how much you will have to pay in taxes.

    Percentage Income Amounts
    15% $55,867 and under
    20.5% $55,867 - $111,733
    26% $111,733 - $173,205
    29% $173,205 - $246,752
    33% $246,752 and up

    How it works is if you make $221,708 per year, you would pay 15% on the first $55,867 and then it goes up from there following that pattern.

    When do you start paying taxes in Canada?

    In Canada, you start paying taxes when you start earning income, however there are some advantages to filing your taxes when you just enter the workforce. If you are under the age of 18 and you earn less than the basic personal amount per year, you still have to file, but you can get a return on a partial amount of the taxes you paid.

    What is the basic personal amount?

    If you are under 18 and make less than around $15,705 per tax year, that's when you will receive a partial refund on the taxes you paid. That is because this is the current basic personal amount for the year.

    Do you pay taxes if you make less than $10,000 per year?

    In short, yes. You have to pay taxes on any amount that you make per year. The less you make though, the less taxes you pay. Because you make a smaller amount each year, you are eligible to receive different amounts from the government since you would be considered low income. Of course, this ultimately depends on your age and living situation as well.

    Are you able to get a refund if you have no income?

    If you receive no income you are likely not to receive any tax refund even if you file a Canadian tax return. This is because you need to pay taxes in order to receive a tax refund. Keep in mind filing a tax return not only affects your federal income taxes, but also your provincial or territorial taxes.

    Do you have to file a tax return in Canada if you have no income?

    While it is not required to file your income tax return if you have no income, you will not be able to receive any money you are eligible for without filing your income taxes. Here is a list of those government benefits.

    While you do not need to have an income to receive these amounts, you will need to file your taxes in order to receive them.

    Who is exempt from taxes in Canada?

    There are two main instances where you would be exempt from paying taxes in Canada: Low income and the Disability tax credit.

    Low Income

    If you make less than $40,000 per year in taxable income you are likely to be exempt from most taxes. Don’t forget this is household income. If you and your spouse or other household members make over $40,000 combined then you would have to pay the minimum tax. However, there are instances even if you make less than $40,000.

    1. You report a capital gain/taxable Canadian property that’s taxable.
    2. You claim a loss from investments or resource properties
    3. You Claim:
      • a federal political contribution tax credit
      • an investment tax credit
      • a labor-sponsored funds tax credit
      • a federal dividend tax credit

    Disability Tax Credit

    The disability tax credit is a non-refundable tax credit that helps those who are impaired by reducing or eliminating their taxes. The amount you are exempt from paying is based on how much you earn.

    In order to qualify for the disability tax credit you must have a severe and prolonged impairment and have a certified document from the doctor confirming this. These include:

    • Walking
    • Mental Functions
    • Hearing
    • Speaking
    • Dressing
    • Vision
    • Feeding
    • Eliminating
    • Life Sustaining Therapy

    Who is required to file taxes in Canada?

    While not everyone is required to file taxes in Canada, let's go over some of the situations that do require you to file taxes in Canada?

    1. If you have to pay taxes for the year. There are a lot of reasons you may have to pay Canadian income taxes when you file, like rental income, self employment and other employment situations.
    2. If you want to claim a refund. While filing isn’t required, it is the only way to receive the refund whether it is a federal tax refund or a provincial or territorial refund.
    3. You want to claim the CWB (Canada Workers Benefit) or have received advance CWB payments. This is a refundable tax credit that helps individuals and families who are low income.
    4. You and/or your spouse want to keep receiving government benefits like the CWC, GIS, and the Canada child benefit.
    5. The CRA has sent you a request to file a return. This happens when the Canada Revenue Agency has noticed that you should have filed your taxes but have failed to do so.
    6. You and your partner are choosing to split your pension income.
    7. You have disposed of a capital property or realized a capital gain. These situations would occur if you have any investments or are into day trading.
    8. You have to repay any of your OAS (old age security), EI (employment insurance), or CRB (canada recovery benefit) benefits.
    9. You haven’t repaid the amounts from your RRSP regarding the Home Buyers Plan or the Lifelong Learning Plan. After you borrow from either of these plans you have an allotted amount of years to pay these off. You do this by claiming a certain amount of your RRSP contributions every year on your taxes as repayment. This means you do not get a tax deduction for these amounts and they are considered as repayment. Paying these amounts back in time avoids a tax penalty, however it will affect your amount of tax payable, so keep that in mind.
    10. You can contribute to CPP (Canada Pension Plan). Since most jobs, including a certain amount of self-employment income, have amounts that get contributed to CPP, this means you need to file.
    11. You pay EI premiums on any self-employment income or any other type of income that’s considered to be eligible.
    12. You have previous tuition or education fees that you have not yet claimed. Because you are entitled to a tax break by claiming to be a student as well as your school expenses and tuition, it is important to claim that for a refund. The good thing is, even if you miss or forget about it one year, you can claim it on the next year's tax return.
    13. You want to report any income that allows you to contribute to any type of RRSP. Instead of pension plans, many employers offer RRSPs(registered retirement savings plan) that they contribute to as well as you. You would have to claim that income in order to be eligible.
    14. You have income that you want to report in order to increase your Canada training credit limit. The Canada training credit is a tax break for students and any expenses have been incurred in relation to them being a student.
    15. Lastly, you want to file if you have an unused investment tax credit on expenses that came across from the current year to a future year.

    What happens if you don't file taxes in Canada?

    Not filing your taxes if you are required to is considered tax evasion. The longer you avoid them the harsher the penalties but, after 10 years, your time is lapsed. You have 10 years from the end of the calendar year to file your taxes but it is recommended to do that immediately.

    The penalties for tax evasion include having to pay the amount you owe in back taxes with penalties and interest that can add up to as much as 200%. There is also a possibility of up to 5 years jail time.

    Should you file your taxes even if you aren’t required to?

    Overall, whether you are required to or not, you should file your taxes. Even if you don’t owe, there are benefits to filing like government benefits and return amounts. Depending on the complexity of your tax return you could file them yourself or consult with a tax professional. Often there are many ways we can earn a higher tax return amount that we aren’t aware of and an accountant can help you with that.

    Even if you do owe money, a tax professional can look over your finances and expenses and let you know if there are ways you can save some money. Avoiding your taxes if you have to file does not mean you won’t end up having to pay them. It puts you at risk for tax evasion which means you will likely end up having to pay more money on the taxes owing than if you did your taxes originally.

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