What Syrian refugees and other new Canadians should know about tax filing in Canada
The year 2015 represented a truly historic year for Canada's immigration record. Already, the government has welcomed more than 27,000 Syrian refugees into Canada as part of its commitment to this global humanitarian effort.
As they and thousands of other New Canadians settle into Canada, among the many things that they'll need to take into consideration are their tax obligations. The Canada Revenue Agency provides in-depth resources for New Canadians to learn more about our tax system, and their filing requirements. Here are some of the more important questions that need to be answered about tax filing.
When am I considered a resident of Canada?
While you may still be waiting for your official resident status, the CRA considers you a resident for tax purposes on the day you arrive in Canada. This applies to everyone who arrived under the Immigration and Refugee Protection Act, people who applied for, or received, Permanent Residency, and people who received "approval in principle" to stay in Canada.
If you enter Canada as a refugee, you do so as a Permanent Resident and, for the time you are in Canada, you will be taxed based on the world income you earn during this time. Your income is prorated based on the number of days you are a resident. The only time this does not apply is if 90 per cent of your income was earned while you were a non-resident of Canada.
Do I have to file a return?
The short answer is yes. Especially if you have to pay tax or want to claim a refund. Plus, the CRA uses returns as a way to determine eligibility for certain benefits.
Syrian refugees and other new Canadians can apply for the GST/HST Credit and Canada Child Tax Benefit if they have children.
What do I need to file my return?
This is a question asked by everyone -- not just new Canadians. You need any income slips that relate to money earned or received after you arrived in Canada. The most common slip that people will receive is their T4. It is usually mailed out by their employer.
How do I file my return?
There are a number of ways you can file. Most Canadians will file through the assistance of a tax preparation service. Increasingly, however, more Canadians are filing on their own through online and downloadable tax software. The important thing is that if you have questions, you seek out help and make sure you are filing correctly and on time.
When do I file my return?
The deadline for filing in Canada is usually April 30. However, because April 30 is a Saturday, this year the deadline for your 2015 return has been extended to May 2, 2016.
How do I calculate my credits and deductions?
Deductions come off of your taxable income and credits go against any tax you owe. The important thing to know about Canada's tax system is that it's unique to each individual based on their eligible credits and deductions. So, it's important to take time and research what you might be eligible for. A good place to start is by reviewing the CRA's general income tax and benefit package.
What am I allowed to claim if I contributed to a community effort to bring a family into Canada?
There are all sorts of great stories being told about families and communities coming together to help bring a family into Canada. While they may not be thinking about it at the time, they do have to know that charitable donations tax credits can be claimed only if you donate to a registered charity. There are a number of such charities whose purpose is to assist with the resettlement of refugees, including church groups. If you donate up to February 29, 2016, the government will match your donation. However, if you independently provided financial assistance to a refugee family (as in the case of private sponsors) you would not get any tax credits.
Taxes in Canada can be confusing, even for those who have been filing them for years. As I mentioned above, it is really important people take time to do their research -- from understanding the basics of our tax system, to investigating the credits and deductions that apply to them. Through sound planning and preparation, the process can be made easier.
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Keep a copy of every investment account in which you have non-registered funds and make sure you have a T-slip for all the investment income (dividends, interest, capital gains) you earned during the year.
Locate your notice of assessment from the year before to see the exact amount of RRSP contribution you can make this year. Also, check if there are any unclaimed contributions.
From that same notice of assessment document, check to see if there are any expenses that have been carried forward that you may use this year.
If your income is going to be substantially higher next year, do not claim your RRSP contribution this year. Wait until the following year when you are in a higher tax bracket to claim it.
If you have children currently enrolled in post secondary education, consider transferring the tuition credit to your own tax return.
If you or anyone in your family has a medical condition that restricts your daily activities, consider filing for the disability tax credit. You may be able to recover this tax credit as far back as 10 years – which is equal to about $1,500 a year.
If applicable, don't forget to record the capital gain on the sale of your cottage in Canada or vacation property outside the country. However, you may not always have to declare your summer home. Talk with your accountant to see what makes better financial sense. If the cottage, for example, has increased substantially more in value than the house you currently reside in, it may make sense to declare the summer home as your principal residence. Remember, this move does not attract capital gains and defers paying capital gains on the home you reside in.
If you need to travel outside of your region for medical care, don't forget to claim meals and travel for yourself and your spouse.
If you live in a household with two taxpayers, consolidate donations and have one taxpayer claim them all. This way the tax credit increases substantially on donations over $200.
If your income is low, don't forget to report your rent or property taxes in order to qualify for provincial tax breaks for rent and/or an HST refund, for example.
Stuck? Get in touch with an accountant. To be extra cautious, ask if they attend tax update seminars through the year to stay current. Avoid people who strictly rely on tax software.
This year, keep a file handy to hold all of your receipts and other documents required for filing taxes. This way, everything will be in the same spot come April of 2015.
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