I know it could be exciting moving to a new country and starting a new life, a new job or education. But, there are certain liabilities that one needs to keep in mind before moving to a different country. It is not always the bed of roses you may imagine and yes, you might be guessing it right, I am talking about the most dreaded and hated the “T” word here, TAXES!
Today here in this article we will try to unfold some of the facts that you need to keep in mind while filing tax returns in Canada and do you even need to? Let us find out.
Canada is an extremely beautiful country and Justin is an amazing prime minister, I totally agree but, it is definitely not a place if you are avoiding taxes and the sad part is there is no place on earth where you can avoid taxes. I know you guys hate taxes, I mean who loves taxes? It involves maths. A lot of it.
Let us understand some of the steps to master your taxes in Canada, do not worry it is not a lot to grab.
Let us start with the meaning.
Thankfully the meaning and the definition of a “Tax return” is near to same for every country and it stands for the declaration of the annual income of any individual to the respective government. The return is used by the government to decide whether an individual is eligible for any kind of refund from the government, hence the term “Income tax return”.
Now, when the definition is out of the way, we can start learning about the whole process:
At first, you need to decide that whether you are obliged to any kind of taxes and if yes then what are those? How do you do that?
It is quite simple to determine by knowing your residency status and by visiting the website of “CRA” Canadian revenue agency and look for the laws around taxes which include your particular residency status and get a hold of those. There are different laws for all the different types of residency statuses.
Now, when you are sure of your liabilities, you need to keep a track of your deadline which is the 30th of April for the following year but, it is always recommended to plan out your taxes and liabilities you are entitled to as early as possible and do not wait for the deadline to approach as this may not provide any benefit from the government’s side but, the mental peace you will get would be more than anything and you will also have some time in your hands if you make any kind of mistake in the filing process and if you need to file some of the papers again. Notably, no process is available which will provide any kind of extension to these dates.
Now, keep your T4 papers all aligned with all the employers, if you have multiple employers that you have worked with, now you might have a question on your mind that what is the T4 paper?
Well, a T4 is a summarised document that clearly states the income of an individual from the previous year and the amount of tax you have paid in that respective year. And that is not the only paper you will need or we can say that these are the mandatory papers that you will need for your tax returns in Canada.
But you may want some extra papers if you want to be eligible for some “Returns”. Simply, the money you are eligible to get as a refund from your government if you have overpaid some of your taxes.
Now, here is the better part of your tax filing process in Canada, just like any other country the tax deductions and credits work in your favour by significantly reducing the annual gross income. For example, if you are a business owner and you are self-employed then you might have some expenses in running your business like the stationery you bought or the rental you pay for your place or even the medical bills. These are some of the expenses you can produce to decrease your annual income hence decreasing your taxes.
Also, you might want to look out for various benefits for the covid impacted people which have been introduced by the government of Canada which will also reduce some of your tax burdens but, mind it those are taxable too.
So, these were some easy and comprehensive steps if you want to go the right way in filing tax returns in Canada and live peacefully.
Please keep in mind to take all of these steps with a pinch of salt as the rules and laws keep on changing and might dent your pockets by just following these steps blindly and incur some penalty. So, it is always advisable to do your own research while taking monetary decisions like these and contact your finance guy before going ahead in your taxes.