Common Tax Questions in Canada

Common Tax Questions in Canada

WHEN DO I HAVE TO FILE MY TAXES?

In Canada, the deadline for filing your personal income tax return is April 30th of the following year. For example, if you are filing your tax return for the 2021 taxation year, the deadline to file is April 30, 2022.

If you are self-employed or have a business, the deadline for filing your tax return is June 15th of the following year. However, if you have a balance owing for the year, you will still need to pay it by April 30th.

If you are unable to meet the April 30th deadline, you can request a tax return extension by filing Form T1-ADJ, T1 Adjustment Request. This will give you an additional four months to file your return. However, you will need to pay any balance owing by the April 30th deadline to avoid incurring interest charges.

It’s important to note that these deadlines apply to federal tax returns only. You may also need to file a provincial or territorial tax return, which may have different deadlines. You can find more information about filing deadlines on the Canada Revenue Agency (CRA) website.

WHAT HAPPENS IF I FILE MY TAXES AFTER THE DEADLINE?

If you do not file your tax return by the deadline, the Canada Revenue Agency (CRA) will charge you a late-filing penalty. The penalty is equal to 5% of your balance owing, plus 1% of your balance owing for each full month that your return is late, to a maximum of 12 months.

In addition to the late-filing penalty, you will also be charged interest on any balance owing that is not paid by the deadline. The interest rate is set quarterly and is compounded daily.

It’s important to note that even if you cannot pay your balance owing by the deadline, you should still file your tax return on time to avoid incurring the late-filing penalty. If you are unable to pay your balance owing, you can contact the CRA to make arrangements to pay the amount owing in installments.

If you have missed the deadline and need to file your tax return, it’s a good idea to do so as soon as possible to minimize the late-filing penalty and interest charges. You can find more information about filing late tax returns on the CRA website.

IF I FILE MY TAXES AND FORGOT A TAX DEDUCTION, CREDIT, OR MADE A MISTAKE, IS IT TOO LATE?

If you have already filed your tax return and realized that you forgot a tax deduction, credit, or made a mistake on your return, you can file an amended tax return to claim the deduction or credit, or to correct the mistake.

To amend your tax return, you will need to complete Form T1-ADJ, T1 Adjustment Request. You will need to provide detailed information about the changes you are making to your tax return, and you may need to attach additional documentation to support your request.

It’s important to note that you can only amend your tax return for a specific taxation year within a certain time period. For personal tax returns, you have three years from the date you filed your original tax return to amend it. For business tax returns, you have six years from the date you filed your original tax return to amend it.

You can find more information about amending tax returns on the Canada Revenue Agency (CRA) website. If you have any questions about amending your tax return, you can contact the CRA for assistance.

DO I HAVE TO PAY TAXES ON MY CASH GIGS & TIPS?

In Canada, you are required to report all income you receive, including income from cash gigs and tips, on your tax return. This includes income from casual jobs, such as baby-sitting, lawn mowing, or dog walking, as well as income from tips you receive in your job.

If you receive tips in your job, you should keep track of the amount of tips you receive. Some employers may provide a tip pool or may include tips as part of your wages, in which case you will receive a T4 slip at the end of the year that includes the amount of tips you received. If you do not receive a T4 slip, you will need to report the amount of tips you received on your tax return.

It’s important to report all of your income, including income from cash gigs and tips, on your tax return, as failure to do so may result in penalties and interest charges. If you are self-employed, you will also need to pay Canada Pension Plan (CPP) contributions and Employment Insurance (EI) premiums on your self-employment income.

You can find more information about reporting income on your tax return on the Canada Revenue Agency (CRA) website. If you have any questions about whether you need to report income from cash gigs or tips, you can contact the CRA for assistance.

TAX EVASION VS. TAX AVOIDANCE: WHAT’S THE DIFFERENCE?

Tax evasion and tax avoidance are two different ways in which individuals or businesses can reduce their tax liability.

Tax evasion refers to the illegal act of deliberately failing to report or pay taxes that are owed. This can include failing to report all of your income, claiming false deductions or credits, or failing to file a tax return at all. Tax evasion is a serious crime that can result in fines, penalties, and even imprisonment.

Tax avoidance, on the other hand, refers to the legal act of using tax laws and strategies to minimize your tax liability. This can include taking advantage of deductions, credits, and exemptions that are available under the tax code, or structuring your affairs in a way that reduces your tax liability. While tax avoidance is legal, it is generally frowned upon and may be viewed as unethical.

It’s important to note that while tax avoidance is legal, it can be difficult to distinguish from tax evasion. The Canada Revenue Agency (CRA) has strict rules in place to prevent individuals and businesses from engaging in aggressive tax avoidance, and may challenge tax avoidance schemes that it believes are being used to improperly reduce tax liability.

If you have any questions about tax evasion or tax avoidance, you can contact the CRA for more information.

HOW LONG AFTER I FILE WILL I GET MY TAX RETURN?

The length of time it takes to receive your tax return after you file will depend on several factors, including how you filed your return and whether you are entitled to a refund or owe a balance.

If you filed your tax return electronically, you will generally receive your refund or notice of assessment within two weeks of the CRA receiving your return. If you filed a paper tax return, it will take longer to process your return, and you can expect to receive your refund or notice of assessment within four to six weeks.

If you are entitled to a refund, the CRA will generally issue your refund as soon as possible. If you owe a balance, the CRA will send you a notice of assessment indicating the amount you owe and the payment due date.

It’s important to note that the processing of tax returns may be delayed due to high volumes or other factors. If you have not received your refund or notice of assessment within the expected time frame, you can check the status of your return on the CRA’s “My Account” service, or contact the CRA for more information.

WHAT ARE SOME TAX CREDITS I SHOULD KNOW?

There are a number of tax credits available in Canada that you may be eligible to claim on your tax return. Some of the more common tax credits include:

• Basic personal amount: This is a non-refundable tax credit that you can claim to reduce the amount of tax you owe. The amount of the credit is based on your income and filing status.
• Canada caregiver amount: If you are caring for a dependant with a physical or mental impairment, you may be able to claim this credit.
• Disability amount: If you have a physical or mental impairment, or if you are caring for a dependant with an impairment, you may be able to claim this credit.
• Tuition and education amounts: If you are a student or a parent of a student, you may be able to claim credits for tuition fees and other education-related expenses.
• Charitable donations: If you make charitable donations, you may be able to claim a credit for the amount of your donations.
• Medical expenses: If you or your dependants have incurred significant medical expenses, you may be able to claim a credit for a portion of those expenses.

These are just a few examples of the tax credits that are available. There are many other credits that you may be eligible to claim, depending on your situation. You can find more information about tax credits on the Canada Revenue Agency (CRA) website, or you can speak with a tax professional for more information.