As a Canadian resident, you’re only required to file a personal tax return if:
- You owe taxes (i.e., before applying credits for source deductions and installments).
- You’ve earned taxable capital gain or disposes of capital property in the year.
- You have a balance in your Home Buyer’s Plan or Lifelong Learning Plan at the end of the year.
People with no payable tax (because the tax on their income is less than the value of their personal credits) may be tempted to not incur the cost of filing a personal tax return. But that would be a mistake for five reasons:
- Tax Refund – If your taxes and CPP/EI contributions are taken off your paycheck, you will most likely be due a refund of income tax withholdings as you may have over contributed to CPP and EI for the year. A refund of the income tax withholding and/or CPP/EI over contributions can only be obtained by filing a tax return.
- GST/HST Credit – You may be entitled to the GST/HST credit. The credit is intended to reduce the impact of GST/HST on low-income individuals by paying a quarterly rebate to them. This credit can only be obtained by filing a tax return.
- BC Low-Income Climate Action Tax Credit – You may be entitled to the BC low income climate action tax credit, intended to reduce the impact of BC’s carbon tax on low-income individuals by paying a quarterly rebate to them. This credit can only be obtained by filing a tax return.
- RRSP Contribution Room – Any income earned in a year can generate RRSP contribution room for subsequent years (18% of your earned income for the year, to a maximum of $24,270 for 2014). Although you might not make use of your available contribution room at this time, it can be used at any time in the future. The contribution room can only be generated by filing a tax return.
- Normal Reassessment Period – Generally, the Canada Revenue Agency cannot assess or reassess a taxation year after three years have passed since the notice of assessment for that taxation year was mailed. If you don’t file a tax return for a particular year, the clock never starts running on this limitation period. Theoretically, the CRA could assess that taxation year at any time in the future.
When you consider all the benefits of filing a return, the nominal cost of filing a simple return is a small price to pay. If you need help filing your taxes, contact one of our personal tax specialists today.