Filing taxes is a vital part of Canadian life that newcomers might find intimidating the first time they need to file. Here’s how one can file taxes in Canada as a newcomer.  

How Do Income Taxes Work In Canada? 

In order to file taxes in Canada as a newcomer, all individuals must file their taxes for the previous year with the Canadian Revenue Agency. Employers generally give employees a tax form detailing their income and tax information for the previous years. This form is an integral document for filing personal taxes. 

All people working in Canada are subject to two separate tax rates. The first is the provincial income tax, which is set by the territory/ province that an individual is working in. Moreover, the second is the federal tax rate, which the Canadian government sets. 

Tax rates can differ depending on an individual’s income level. Canada uses a marginal rate tax, implying that people are taxed based on how much they earn. Simply put, the more one earns, the more they are taxed, but this is not a flat rate. For instance, if an individual earned $60,000 CAD last year in Ontario, they would pay 5.05% on the first $49,231 CAD and 91.5% on the next $10,769 CAD. 

This gets more complicated when combining the provincial tax rate with the federal tax rate. However, tax filers can use programs such as online tax calculators to help calculate this total. Most salaried employees have this tax automatically applied to their income upon receiving their pay, and it will appear as a deduction from their gross pay. 

In addition, the deadline for filing personal taxes in Canada is April 30th. Taxes Zan be filed after, but individuals might be subject to a penalty. Separate rules apply for those who are self-employed. Failure to file one’s taxes can result in the worst penalties & even possible criminal charges for tax evasion. 

On the opposite end of the spectrum, filing one’s taxes can bring multiple benefits to people.

How Can I File My Tax Returns In Canada? 

There are numerous ways for individuals to file their taxes in Canada. Specifically, CRS recognizes five different ways for individuals to file their personal tax returns. 

  • Certified Tax Software 

To file taxes in Canada as a newcomer, the first thing to know about is the Certified Tax Software. It is the most common method of filing tax returns. The CRS approves various software/ websites for different tax years, which individuals might use to file their tax returns. 

These electronic tools must be authorized to NETFILE services, which is an electronic service that connects directly to CRA & allows for instantaneous electronic filing. 

Electronic filings are estimated to take around two weeks to process from the time of filing & are usually free. However, pricing can change based on different services & tiers of service used by filers. After tax returns are processed, filers might be eligible for a tax refund, which generally compensates individuals with any extra money that CRA has collected from them throughout the year or with rebates & credits obtained via different programs. 

The CRA has compiled a list of approved software & websites to electronically file taxes. In addition, CRA estimates that this method allows a return to be assessed within two weeks. 

  • Authorized Representative 

Tax filers in Canada can also authorize a representative to do taxes on their behalf. This could be an accountant, family member, friend, or anyone else that the filer trusts to manage their financial data. In this case, steps must be followed to authorize the representative. 

Costs can vary depending on agreements made between the filer & their representative. The CRA estimates that this method generally yields a wait time of around two weeks. 

  • Community Volunteer Tax Clinic 

Individuals in Canada with a relatively modest income or a simple tax situation might be able to use a free community tax clinic in their area. These are often clinics in an area that can help individuals file their tax returns for no cost. 

Well, clinics can be walk-in drop-off or by appointment, with some even offering virtual appointments as well. The CRA estimates that taxes filed this way might be processed within two weeks. 

  • Discounter 

A discounter/ tax preparer is someone who can calculate a filer’s tax return upfront & pay them a discounted amount. Costs can vary for this method, but the advantage is that individuals can obtain their tax return immediately—though, as mentioned, the discounter takes away a portion of the service. 

The CRA conducts compliance programs with these individuals to ensure that filers who utilize these services are protected under the Tax Rebate Discounting Act. 

  • Paper Tax Return 

Individuals who are not comfortable filing online or through one of the already-mentioned methods can file their taxes on paper. This method has become increasingly unpopular in recent years, as it tends to take longer to process, i.e., around eight weeks from the time of filing, if done before April 30th.  

However, this method is free and still available for those who would like to use it. Anyone using this method will need a T1 income tax package.   

Filing By Invitation

The CRA might also invite certain individuals to file their taxes via an automated phone line or with the help of a CRA agent. These methods can be used if filers have particularly received an invitation & they have a modest income or simple tax situation. 

Moreover, the CRA will hold an interactive webinar on March 20th to give further information regarding Canada’s tax system, different credits available to filers, and ways to get help when doing one’s taxes.