Tax time is stressful, especially for those who haven't got their paperwork together, or, worse, suspect (or know) they're going to owe a substantial amount of money to the Canada Revenue Agency (CRA). Stress begets procrastination, and procrastination begets more procrastination. Eventually, there's denial: I don't really have to file a tax return on time, do I?
The answer, for the vast majority of Canadians, is: Yes. And those who aren't required to file a return are missing out on cash and other benefits. According to an online survey by research house Leger, only one per cent of Canadians don't intend to file a tax return.
The most important consideration is whether you owe the government money. If you've been a regular employee of a single company for the entire year, chances are that company is withholding enough tax at source from your paycheques to cover your obligations to the government. The catch-22 here is that you won't know that for sure until you fill out a tax return. If you received a raise, or received taxable benefits from your employer, that could affect whether enough is being deducted at source.
If you have casual income that's not reported on a T4 slip, or if you're self-employed, you must file a tax return. It's a good idea to put about 35 per cent of that income away in a separate bank account; it may be more than necessary, but you don't want to be caught short when the tax bill comes in. If you're self-employed, you also have to contribute to the Canada Pension Plan (CPP) as both an employee and an employer; in order to do that, you must file a return.
For the most part, Canadian tax filers have to submit a return, and any amount owing, by April 30. Self-employed individuals, or those whose spouse or common-law partner is self-employed, have until June 15 to file a tax return. However, any amount owing is still due April 30, so if you're self-employed and haven't made regular remittances to the CRA, April 30 is still the effective deadline.
Still don't think you have to file a return? Ask yourself these questions:
• Did you receive working income tax benefit (WITB) payments, or do you intend to claim them for this year?
• Did you and your spouse decide to split pension income this year?
• Did you withdraw money from a registered retirement savings plan (RRSP) to use under the Home Buyer's Plan or the Lifelong Learning Plan that hasn't been fully repaid?
• Did you dispose of property for a capital gain?
Under all of the above circumstances, you are required to file a tax return. And sometimes, the CRA simply insists that you file a return. This most often applies to previous years that you've neglected to file a return.
If you're the executor for a person who passed away in 2013, you may also have to file a return for that individual. Rules for filing can be complex; fortunately, the CRA publishes information about your filing requirements and options in two guides available on its website: Guide T4011 (Preparing Returns for Deceased Persons) and Information Sheet RC4111 (What to do following a death).
If you haven't been caught in one of the above nets, there are still good reasons to file a return. Most obviously, if you want to claim a tax refund, you have to file your paperwork. Sixty-one per cent of Canadians anticipate a tax refund, according to the Leger survey.
And with roughly 400 tax credits and deductions available to an individual, there's good reason to be optimistic about getting money back from the taxman. According to the Leger survey, 77 per cent of Canadians were planning to claim at least some tax credits. Charitable donations, medical expenses and RRSPs topped the list of credits Canadians were planning to claim. You'll also have to file a tax return if you want to claim common credits and benefits such as the GST/HST credit, child tax benefits, and the working income tax benefit, for example. If you paid tuition for post-secondary education, you'll have to file a return to get that credit, or if you want to transfer part of that credit to a family member once you've reduced your tax bill to zero.
Even if you can't afford to pay your outstanding tax balance, it's important to file your return on time. If you miss the deadline, you'll get slapped with a late-filing fee of five per cent of your outstanding balance, along with the interest accrual of one per cent per month.
It's a rare case that it's not in your best interest to file a tax return before the deadline. Living in denial doesn't change your monetary liability, and filing late can lead to complications and delays in collecting benefits to which you're entitled.
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