It’s the start of March which means we are officially into tax season in Canada. If you’re in Canada on a working holiday or have recently left, I have no doubt you have at least a couple of questions about filing your tax return. I’ve written about tax a couple of times before, but there are a number of questions that crop up time and time again about completing tax returns in Canada during or after a working holiday. Here is your one-stop shop to find the answers! I’ll start with the absolute basics.
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what is the purpose of filing a tax return?
Most individuals in Canada are allowed to earn up to a certain amount without paying tax. This tax-free threshold is called the ‘basic personal amount’ and was $11,635 in 2017. If you earn over this amount, you will need to pay tax.
Though you may have noticed tax being deducted from your payslips already, you need to file a tax return after the end of the tax year to make sure that the correct amount of tax has been paid. In a lot of places, such as my home country of the UK, tax calculations are made automatically by the government to make sure you have paid enough tax. In Canada, this is not done automatically and hence a manual tax return is needed.
Why do I need to file a tax return in Canada?
If you have underpaid tax, the Canada Revenue Agency (CRA) charges interest on the outstanding balance. Not completing a tax return if required is a form of tax evasion, and that’s never a good thing – just ask Al Capone.
If you have overpaid tax, you may be eligible for a refund. Filing a tax return is the only way to get a potential refund.
Filing a tax return is especially important if you intend to live in Canada long-term. As part of the citizenship application, you must have a clear tax record.
When is the Canadian tax year?
The Canadian tax year runs January-December. Tax season usually starts in the following February and finishes at the end of April i.e. tax returns are accepted for the 2017 tax year from February 2018 onwards and the deadline is April 30th 2018. Tax returns for 2018 will be accepted from February 2019 until late April 2019.
What happens if I miss the tax return deadline at the end of April?
Returns submitted after the deadline are still accepted, but if you owe money to the CRA, there will be a penalty and interest charges. If the CRA owes you money, no problem, but the return will likely take longer to be processed than it would have done before the deadline.
Note: Self-employed people have a later deadline for their returns, typically in the middle of June.
Who are the ‘CRA’?
CRA is an acronym for the Canada Revenue Agency. To put it simply, they are in charge of tax laws for the Government of Canada and most provinces and territories. Be prepared to see them mentioned a lot when filing your taxes!
What are CPP and EI contributions?
So you’ve probably noticed an amount of income tax being removed from your paycheck. But you may be wondering what the other two deductions are.
EI is Employment Insurance, a program run by the Government of Canada to provide temporary financial assistance to workers who have recently lost their jobs. EI premiums are deducted from your pay automatically. As a working holiday participant, you cannot opt-out of EI contributions.
CPP stands for the Canada Pension Plan. Everyone over the age of 18 in Canada (excluding Quebec) who earns more than $3,500 per year must contribute to the CPP. The amount depends on your income and is deducted from your pay automatically. It is possible to claim an overpayment of CPP but note that the funds would not be paid out until you reach pension age (60+).
What do I need to file my tax return in Canada?
To complete your Canadian tax return, you will need:
- T4 from each employer you have worked for
- Your Social Insurance Number (SIN)
If you are eligible for any tax credits, you will also potentially need receipts and other documentation for reference.
What is a T4?
A T4 is an information slip prepared by employers to summarise how much money you earned and how much income tax was deducted. The full name for this document is T4, Statement of Remuneration Paid.
By law, your employer must send a T4 to you by the end of February. Most employers will mail T4s.
If you leave Canada mid-way through a tax year, you will still have to wait until the end of the year to receive your T4.
Once I have my T4, what do I do with it?
Keep it somewhere safe! If possible, take a scan or a high-quality photo of it so you can have a backup electronic copy. You will need the employer name, income amount, taxed amounts and other information from your T4(s) for your tax return.
What should i do if my T4 does not arrive?
If it doesn’t arrive by the end of February, chase it up with your employer. If no luck, contact CRA. I once had to do this and the CRA agent advised me of all of the relevant information on it (income amounts, taxed amounts etc) before also sending a printed copy to my mailing address.
How do I file my tax return in Canada?
If you talk to Canadians, you’ll soon find out that everyone has their own preferred way of filing their tax return. Many people do not want to delve into the world of taxes and prefer to pay someone else to do the work for them. Other people would prefer to save money and have full control of the process themselves. However you decide to do your tax return, the important thing is to get it done!
Complete the process yourself on paper
This method is free, except for postage. You can download, print, complete and send the tax forms direct to CRA (Canada Revenue Agency). Packages of forms are also available from Service Canada offices and Canada Post if you are still in Canada.
Use tax software to help complete the forms
There is free or low-cost certified software you can download to enter your information into. If you are filing as a resident of Canada, you can use these. The program will complete the calculations and then you can either send directly to CRA online via the Netfile service (if not your first tax return) OR print out the forms and send to CRA. Examples of tax software: SimpleTax, GenuTax
Hire an accountant or tax filing service
This option involves paying an accountant or company to fill out the forms or complete your entire tax return. Be aware that not every tax preparation company will have lots of experience processing tax returns for people on working holidays. Some companies prefer to file tax returns only for Canadian Citizens/Permanent Residents. Examples: H&R Block, Liberty Tax Canada
International tax filing service
For the most straightforward and hassle-free option, consider using taxback.com (5% discount with this link) for your tax return. They will offer you a free estimate for the return and then charge a flat fee should you choose to proceed. Taxback.com specialises in filing taxes for working holiday participants and will work to make sure you receive the maximum refund available. Their average tax return from Canada is $900.
As someone on a working holiday in Canada, am I considered a resident or non-resident?
It depends on your situation. Everyone’s situation is different. I have written an article about determining your tax residency status but otherwise, I’d highly recommend consulting either the CRA, an accountant or professional tax filing company.
I’m in Canada on a working holiday – can i file my tax return online?
Yes, but only if you are filing as a resident of Canada still currently living in Canada and it’s your second tax return. You can’t use Netfile for your first tax return in Canada. If you are filing as a non-resident or have already left Canada, you will also have to complete the paper forms and then send via the mail to CRA.
Are there any tax credits or deductions I can claim?
Maybe! It all depends on your circumstances. Some tax credits more common for working holiday participants to apply for include:
- Charity donations
- Volunteer tax credit for search and rescue members or firefighters
- Medical expenses NOT reimbursed by an insurance company
- Annual or monthly transport passes (purchased before July 2017 – this was recently phased out)
How does tax filing work if I am self-employed or an independent contractor?
If you are self-employed or an independent contractor, you will need to file a tax return in the same way but with an extra form, currently known as the T4002. As a self-employed person myself, I would highly recommend using an accountant or tax filing service if you have your own business as there are many possible deductions.
What if I’ve had multiple employers during my time in Canada?
When starting work with each employer, you would have filled in some tax forms. How much tax you owe relates to how you completed these forms and your earnings during the tax year.
Keep in mind that:
- Each employer is legally obligated to provide you with a T4 so wait until you receive all of your T4s (if applicable) before starting your tax return
- Some of the free or low-cost tax return software does not allow for entry of more than one T4 – be sure to check this before starting!
What happens if I worked in different provinces during my time in Canada?
Canadian provinces and territories have varying tax rates as well as a different range of tax deductions and credits. This means that your tax return is a little more complicated as these have to recalculated on a pro-rata system.
Who can I contact for help?
The CRA is actually surprisingly helpful (for a government organisation in Canada!) over the phone. There are even extended evening and weekend hours during the late February to April tax season.
If you’re really stuck with an issue, consider whether paying a tax filing company is worth the extra dollars to reduce the stress and time spent researching.
Where do I send my tax return?
All of the relevant addresses can be found on the CRA website in the contact information section.
How do I file a tax return after leaving Canada?
Working holiday participants who have already left Canada can file their tax return in two ways:
- Download the T1 forms from the CRA website, complete and send via mail to the appropriate Canadian processing office (slower option).
- Use an international tax filing service such as Taxback.com (faster option). For a refund estimation, check out the calculator below.
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