It’s not the most exciting or interesting part of your Canadian working holiday but taxes still need to be done! Filing your taxes after a working holiday in Canada can also be quite beneficial, in the form of a tax refund if you have overpaid tax.
If you’re like me and used to the government in your home country automatically calculating tax (and refunds), the idea of filing your own taxes can be a bit intimidating.
Since moving to Canada we’ve had to file our taxes a couple of times now and I can assure you that it’s not as complicated as it sounds, especially as there are a few options that can make the process easier.
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Canadian tax return basics
The Canadian tax year runs January-December. Though you may have noticed tax being deducted from your payslip already, you need to file your own taxes after the end of the tax year to make sure that the correct amount of tax has been paid.
Tax season usually starts in February for the preceding year i.e. tax returns for 2018 can be filed starting February 2019.
The deadline for filing taxes is the end of April. If you haven’t filed by then but do not owe any taxes, then it is no issue. If you do however owe any taxes in addition to what you have already paid, then there will be a penalty to pay.
Whether you are eligible for a refund or not depends on a variety of factors. Keep in mind though that you will never get 100% of the tax you have paid back.
A certain amount of tax, as well as E.I (Employment Insurance) and CPP (Canadian Pension Plan) must still be deducted from your income, even if you’re in Canada on a working holiday.
What is a T4 and why you need it for your Canadian tax return
A T4 is an information slip prepared by employers to summarise how much money you earned and how much income tax was deducted. To be able to file taxes in Canada, you will need a T4 from ever employer you have worked for during that tax year.
At the end of the tax year, any employer you have worked for during that year will provide you with a T4 by the end of February. In fact, they are legally obligated to do so.
Some of my employers have provided this by email, while others still prefer good old snail mail. 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.
You cannot file your taxes without your T4(s). It is possible to apply for a refund not only on your income tax, but also certain other expenses such as medical or work related costs.
Working out your residency status
When filing your taxes in Canada, you will need to know your tax residency status. Whether you are considered a resident or non-resident of Canada for tax purposes entirely depends on your individual situation.
There are no hard and fast rules whether a working holiday participant is a resident or non-resident, it is based on your individual situation. There are so many unique scenarios that make it difficult to definitively state whether you are a resident or non-resident.
I have written a separate article all about determining your tax residency status that may help (link below) but otherwise, I’d highly recommend consulting either the CRA, an accountant or professional tax filing company.
How to file your taxes on a working holiday in Canada
Once you have your T4(s) ready, you will also need to grab your Social Insurance Number (SIN) and then work out the method you want to use to file your tax return in Canada.
The general difference is cost and amount of effort involved. Everyone approaches their taxes differently:
- If you like control and/or are on a budget, consider completing the process yourself
- If paying someone else $50-100 to deal with your tax return sounds good, think about using a tax filing service
1. Complete the process yourself by mail (cheapest, most effort)
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 decide to use this method, you will need to read up and decide whether to apply as a resident or non-resident.
2. Use tax software to help complete the forms (cheap, less effort required)
You can also buy or download easy to use tax return software to enter your information into. The program will complete the calculations for you and generally make the process more simple.
- If filing as a resident or non-resident of Canada and it is your first ever tax return in Canada, then you have to do is print off the forms and send to CRA in the mail
- If you are filing as a resident of Canada and it is not your first return, you should be able to send your return direct to CRA online via the Netfile service
Note that the free or low-cost tax filing software is often limited to just one return (so you can’t share the program around) and one T4. So if you have more, check the limitations of the program before purchasing or downloading.
3. Hire an accountant or company to prepare your forms (mid-range cost, easier)
This option involves paying an accountant or company to fill out the forms with information provided by you, with the starting price around $40-50.
Be aware that not every tax preparation company will have lots of experience processing tax returns from people on working holidays. Some companies may even tell you that they do not do returns for non-Citizens/Permanent Residents.
4. Use a tax filing service for the whole process (most expensive, easiest)
Tax filing companies will effectively do everything for you from start to finish. It is estimated that over half of Canadians choose a company to file their taxes for them. This tax filing method is usually the most expensive ($60+).
The most straightforward and hassle-free option is to use an international tax filing service such as taxback.com (5% discount with this link), that specialises in filing taxes for working holiday participants. They will give you a free estimate and then charge you a set fee if you wish to continue.
Taxback work to make sure you receive the maximum refund available – their average tax return from Canada is $900.
Jean Robert used Taxback to apply for an Australian tax return after he’d returned to his home in Canada. As well as making the process super easy, he received a substantial amount back which he was extremely happy with.
Filing taxes after leaving Canada?
If you’re filing outside of Canada, then you have only two real options for filing your taxes.
The first (slower) is to download the forms from the CRA website, complete and then mail to CRA in Canada.
The other (faster) is to use an international tax filing service, as mentioned above.