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How Does a Tax Return Work in Canada? What You Need to Know

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This guide covers the basics of filing your tax return in Canada to ensure it’s done correctly so you can get your refund quickly.

Each year, the time comes to file taxes. Although it might not feel as celebratory as the holiday season, we call this time of year “tax season” – it starts in February and continues until the end of April when taxes are due.

The deadline to file taxes with the Canadian Revenue Agency, or CRA, is April 30, 2024. Generally, you can file your taxes either online or by mail.

While filing taxes can sound like a lot of work, for many Canadians, completing a tax return is how they get a refund of any taxes they have overpaid during the year.

When to File Your Taxes in 2024

In Canada, the CRA is tasked with administering income tax. The income tax year runs from January 1 to December 31. If you owe income tax from that period, you have to pay it by April 30 of the following year (by April 30, 2024). While late submissions are accepted, you may face a penalty or fee.

In 2024, you’ll be filing taxes for the income tax year of 2023, so you’ll be reporting any income from last year. You don’t have to worry about paying taxes on your 2024 income until tax season in 2025.

How to Complete a Basic Tax Return

There are six easy steps that you’ll need to follow to complete a basic income tax return in Canada. The CRA has created a learning tool with detailed video modules on each step, but we’ve covered them here for your convenience and ease.

Step 1: Provide Your Personal Information

When you fill out your income tax return, you’ll be asked to provide personal information so that the CRA can identify you accurately and ensure you’re getting all of the benefits you’re entitled to.

The four most important pieces of information you’ll need are your name, your mailing address, your date of birth and your nin-digit social insurance number (or SIN).

You’ll also be asked to provide your preferred language of correspondence – your options will be English or French – and the province in which you live.

The CRA will also need to know your marital status and whether or not you want them to share your information with Elections Canada to get you registered to vote.

Step 2: Report Your Income

The second step of your tax return involves reporting your income from all sources you’ve earned income from throughout the year.

Income includes the money you receive from salary, social benefits, property returns, investments, and other professional activities. Tips are also included in income.

You’ll be able to determine your income from your information slip, which is also called a tax slip. This document should come from whoever paid you the income, and it will include your income information in a numbered box that refers to a specific line on your tax return. The slip will include instructions about where to report the amount on your tax return forms.

Most employers send information slips by the end of February following the tax year. So to pay tax on 2023 income, you should receive your tax slip by March 2024.

Your employer must also send a copy of the slip to the CRA, so if you log in to your CRA account, you can access it online as well.

Reporting your income helps the CRA determine whether you owe tax or will be receiving a refund. Make sure to track tips or occasional income throughout the year so that you’re ready when it’s time to file your taxes. 

Step 3: Claim Your Deductions

Deductions refer to expenses or other amounts you can subtract from your total income when you fill out your income tax return. Claiming all of the deductions you’re eligible for may reduce the amount of taxes you owe.

Some common types of deductions are RPP or RRSP contributions, union dues, moving expenses and childcare expenses. Filing taxes with tax return software can help you determine these deductions and will help you enter them on your tax return.

Step 4: Claim Your Non-Refundable Tax Credits

Non-refundable tax credits refer to amounts that you may claim to lower the amount of taxes you owe. It’s important to note that if the total of these credits is more than the amount of taxes that you owe, you’re not entitled to a refund for the difference.

Some common non-refundable tax credits include the basic personal amount, the spouse or common-law partner amount, the amount for an eligible dependent, CPP or QPP contributions, the employment insurance amount, and the Canada employment amount. The CRA has more information about these tax credits and eligibility factors.

Step 5: Calculate Your Taxes

In this step of filing your income tax return, you’ll be calculating the tax that you owe. The tax is calculated with the following formula:

Taxable income x Federal tax rate – Federal non-refundable credits = Federal tax

So, for example, if your taxable income is $50,000, you’d multiply it by the federal tax rate of 15% to get $7,500. If you claimed $3,000 worth of federal non-refundable tax credits, your federal tax would be calculated as $4,500. 

For many people, calculating taxes is a little bit more complicated. Because Canada has a progressive tax system, citizens pay more tax as their income increases. There are five tax brackets, and your tax rate depends on which bracket your income falls into.

You’ll have to perform a similar calculation to determine any provincial or territorial taxes you might also owe. Once you do these calculations, you’ll be able to enter them on your tax return.

Step 6: Receive Your Refund or Pay Taxes

Once you complete your income tax return, you’ll be able to find out if you owe taxes or if you’ll be getting an income tax refund from the CRA. You will calculate two amounts.

First, you’ll find out your total payable, which is the sum of everything you owe and includes your federal and provincial or territorial taxes.

Second, you’ll find out your total credits, which include your refundable tax credits. The difference between these amounts is known as your refund if the CRA owes you money or as your balance owing if you owe the CRA money.

How to File Taxes Online

In the digital age, filing taxes online has become a popular option. You can do this through tax return software, or you can do this through the CRA’s NETFILE system.

The CRA has a robust informational page dedicated to different strategies for e-filing.

How to Choose a Tax Return Software

For the 2023 tax season (in which taxpayers filed returns for 2022 income tax), an impressive 92.3% of Canadians who filed did so online. While 32.5% used NETFILE, the CRA’s online filing system, 59.6% used other e-filing methods, the most popular of which was tax return software.

A good tax return software can help you maximize your refund and file your taxes with ease – and many are free.

An attractive paid option is TurboTax. While it does have a free version, the paid version offers many more benefits and can help you complete both simple and complex returns and get the biggest refund possible.

When choosing your tax return software, you’ll want to consider your budget and the various pros and cons of each option. You’ll also want to make sure that whatever software you choose is CRA-approved.

Other Ways to File Your Taxes

In addition to filing your tax return online, there are other ways to file your taxes too, including on paper, in person, or by phone. The CRA offers a File My Return phone service, but only some taxpayers are eligible – you can check your eligibility on their site.

If you file your taxes on paper and fill out printed forms, you’ll need to mail them to the CRA. The mailing office you’ll want to use depends on which province you live in. You can find more detailed mailing information from the CRA on their website.

If your budget allows for it, you can also hire a trained tax professional to file your taxes. This may be a more expensive option, but that person can help ensure you maximize your refund and get all of your bases covered.

It may also be a good option for more complex tax situations. Normally you can do this in person or over the phone.

H&R Block offers a tax preparation service online and in person, or you can use the TurboTax Live program.

How Tax Returns Work if You’re Self-Employed

When you’re self-employed, the process of filing taxes in Canada can be a bit more complicated. In addition to the T1 General Form, you’ll also file Form T-2125, which is a statement of business or professional activities.

You’ll also need to ensure that you’re keeping track of your income throughout the year so that you can accurately report it.

Since you won’t be receiving a tax slip from an employer, it’s your responsibility to make sure that you’re tracking your income and can report it correctly to the CRA.

How Long Does it Take to Get a Tax Refund in Canada?

The time it takes to get a tax refund back in Canada depends on the method you used to file. If you filed online, you can expect a refund in two weeks.

If you filed on paper, the refund may take up to eight weeks to process.

The CRA has service standards that aim to estimate how long refunds will take, but they are processed on a first-come, first-serve basis.

Related: Here are some ideas for spending your tax refund. Also, this is what Canada RIT stands for.

FAQs

How is my tax refund calculated?

Your tax refund is the difference between your total payable and your total credit amounts that you’ll determine in Step 6 of filing your tax return. If you owe more than you’ve paid, you will not receive a tax refund. If your total credit amount is larger than your total payable amount, then you will receive a refund from the CRA.

How much do you get back in a tax return?

There is no maximum tax refund, but the average refund in 2023 was $2,260. If you’re looking to get a refund like that, you’ll likely need to look into some of the deductions or credits mentioned above so that you can claim them on your tax return in Step 4.

Does everyone get a tax refund?

Not every taxpayer is entitled to a refund. You’ll only get a refund if the amount of your total credit in Step 6 of filing your tax return is larger than your total payable amount – in other words, if you’ve overpaid for the year.

Do you automatically get a tax refund?

You have to file your taxes to get a tax refund. If you do not file, the CRA won’t give you a tax refund because it won’t be able to prove you’ve paid more than you owe.

What is the CRA tax return contact number?

To get tax information for individuals, you’ll need the CRA phone number. You can reach the CRA at 1-800-959-8281, and agents will be available on weekdays from 8 a.m. to 8 p.m. and on Saturdays from 9 a.m. to 5 p.m. The line does not operate on Sundays.

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Author

Gravatar for Enoch Omololu, MSc (Econ)
Enoch Omololu, MSc (Econ)

Enoch Omololu, personal finance expert, author, and founder of Savvy New Canadians, has written about money matters for over 10 years. Enoch has an MSc (Econ) degree in Finance and Investment Management from the University of Aberdeen Business School and has completed the Canadian Securities Course. His expertise has been highlighted in major publications like Forbes, Globe and Mail, Business Insider, CBC News, Toronto Star, Financial Post, CTV News, TD Direct Investing, Canadian Securities Exchange, and many others. Enoch is passionate about helping others win with their finances and recently created a practical investing course for beginners. You can read his full author bio.

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