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Tax Return Dos and Don’ts For New Canadians

canada tax return new citizen

What You Need to Know About Filing Your First Tax Return in Canada

New to Canada? Welcome! If you’re new to the country, you can expect lots of friendly, welcoming faces, a strong enthusiasm for hockey, free healthcare, and, of course, our infamously frigid winters. But winter isn’t the only thing you will have to adjust to; our tax system is almost certain to be unfamiliar to you as well. Which can make this time of year – tax time – daunting and confusing to say the least.  It’s difficult to know which tax credits to claim and what income needs to be declared, let alone how or when to file, especially if it’s your first time filing a Canadian tax return. But don’t worry, we’re here to help you!

To get you started in understanding your Canadian taxes, and how to file your first Canadian tax return, we’ve compiled a list of the top dos and don’ts to keep in mind as you prepare to do so.

What is a ‘New Canadian’?

Let’s start by defining what it means to be a “new Canadian.” It indicates that you arrived in Canada this year. It only applies to your first tax year in Canada. For income tax reasons, you are no longer considered a newcomer after your first tax year in Canada (even if you are still getting used to the idea after that!)

A person who lives in Canada for part or all the tax year (January 1 to December 31) is required by law to file a tax return. And what qualifies you as a legal resident? When you develop significant residence ties in Canada. These legal ties, as far as the tax authorities are concerned, are usually formed on the day you arrive in Canada as an immigrant.

The following are also examples of important residential ties:

A full time home
Children and a spouse
A Canadian driver’s license
Canadian health-care coverage
Personal property like large furnishings and cars.

If you are indeed a new Canadian in the eyes of the law, here are those dos and don’ts:

DO Make Sure You Know When Your Taxes are Due 

The last thing you want to do when filing your very first Canadian tax return is do so late, so knowing just when you will need to have filed your taxes by is a must.

Usually, personal tax returns are due by April 30th. Things are a little different in 2022 however, as that date falls on a Saturday. This means that you have a few days grace, and your personal tax return will need to be filed by May 2, 2022.

If you are self-employed, you also have a little longer, as those tax returns can be filed, and not considered late, all the way up to June 15th.

DO Make Sure You Have Your SIN  

You will need your SIN – Social Insurance Number – to file your Canadian taxes for the first time (or at least proof that the application for such is in process) If you have not done so already you can make that application here.

This number is needed to identify you in order for you to file your tax return and apply for federal and provincial tax credits and benefits.

Don’t panic if you applied for a SIN but did not obtain it before the deadline. To avoid late-filing penalties, you can leave that field blank; just be sure to include a letter with your tax return explaining why you were not able to provide it.

Do Make Sure You Claim All the Tax Credits You Are Entitled To  

Even if you only lived in Canada for the minimum amount of time required to be considered a Canadian resident, there still may be tax credits you can claim on your first Canadian tax return, and in order to get all the money you are entitled to you should try to ensure you get them if you can.

For example, if you bought your first home in Canada, and had not purchased another home at all within the last five years (including back in your native country) you may be entitled to the First Time Home Buyer’s tax credit, a $5000 benefit that can help offset some of the (many) costs you’ve been accumulating.

If you have children under the age of 18, thanks to them, you may also be eligible for Canada Child Benefit, more commonly referred to as CCB. Usually, Canadians do not have to formally apply for this tax credit – the CRA determines a tax filer’s eligibility based on their reported income – but as a first time Canadian tax filer you will need to complete and submit Form RC66 Canada Child Benefits Application and the related schedules.

The same is true of another valuable tax perk, the GST/HST credit. In subsequent years, the CRA will automatically determine your eligibility for this quarterly tax benefit, but when filing taxes as a Canadian for the first time, you will need to complete a Form RC151 GST/HST Credit Application for Individuals Who Become Residents of Canada form.

Don’t Forget to Report ALL of Your Income  

When you sell capital assets such as stocks, real estate, paintings, or jewelry, you are only taxed on the gain that has accrued since you become a Canadian resident. As a result, when you arrive, you should keep track of their value.

You can only deduct a loss from selling, giving away, or losing your property from any gains you made from selling the same sort of property. Capital gains or losses will be computed using this amount and, if applicable, the date of sale.

Don’t Fail to File Because You Did Not Generate Income Yet  

Some of the most common misunderstandings regarding filing taxes is that you don’t need to file if you have made very little money in Canada yet, or you are not officially a Canadian citizen yet.

Our tax system in Canada is based on your residency rather than your citizenship. In Canada, residency is established by residential ties. If you’re not sure if you’re a resident for income tax reasons, fill out Form NR74, Determination of Residency Status (Entering Canada) and send it to the Canada Revenue Agency and they will make that determination.

Certain advantages, such as the quarterly GST/HST credit or the Canada Child Benefit, may be available to you if you file a tax return, whether you have made money in Canada or not yet. To check if you are eligible for any of these or other incentives, the CRA requires a current tax return.

Don’t Panic  

Filing taxes in any country can be confusing and stressful. This is even more true when you are filing taxes in your new country for the first time. You will want to get everything exactly right – no one ever wants to get on the wrong side of the tax authorities anywhere – and yet still claim back any money you are entitled to.

For all these reasons and more, even if you were used to filing your own taxes ‘back home’ having a tax professional do them for you this year is a smart move. As Canadian tax experts, we can help you ensure that you are doing everything right and at the same time help you learn how to plan for next year’s taxes as well. We can also help you understand what differences the province you call home can make to your tax situation as well.

If you are new to Ontario and need assistance with your taxes this year, contact us here, we would be delighted to help.