We solve serious CRA tax problems

Your Guide to Filing Tax Returns & Unfiled Tax Returns in Canada

Filing your taxes can seem like a complex task, especially if you’re new to the process or have unfiled returns from previous years. On the other hand, you may have been filing your own taxes since you started working. Either way, it’s always prudent to consult experienced tax accountants to ensure you’re reporting correctly and that you’re taking advantage of all the available tax credits you are eligible for.

A Closer Look at the Canadian Tax System

Understanding the Canadian tax system, even at a basic level, can help you get a better understanding of your tax obligations.

Progressive Taxation

Canada operates on a progressive tax system, which means the more you earn, the higher the percentage of your income you’ll pay in taxes.

In practice, this system has multiple tax brackets. As your taxable income increases, you move up the brackets. It’s worth noting that only the income within each bracket gets taxed at that bracket’s rate. So, if you’re just above the threshold of a higher bracket, only that excess is taxed at the higher rate, not your entire income.

Federal vs. Provincial Taxes

In Canada, both the federal and provincial governments levy income taxes. While the federal tax rate remains consistent across the country, provincial rates vary. For instance, Alberta has a flat provincial tax rate, while provinces like Ontario and British Columbia have progressive systems similar to the federal one. You must be aware of both when calculating potential tax liabilities.

Non-Refundable vs. Refundable Tax Credits

When you hear about tax credits, they often fall into two categories:

  • Non-Refundable Tax Credits. These reduce the tax you owe. Examples include the Basic Personal Amount or the Canada Caregiver Credit. The term ‘non-refundable’ means these credits can bring your tax liability down to zero, but they won’t generate a refund beyond that.
  • Refundable Tax Credits. These can offer a refund even if you owe no tax. The Working Income Tax Benefit and the Goods and Services Tax/Harmonized Sales Tax (GST/HST) credit are common examples.

Residency Status and Its Impact

Your tax obligations in Canada significantly hinge on your residency status. Residents are taxed on worldwide income, while non-residents are only taxed on income earned within Canada. It’s essential to determine your status accurately, considering factors like the length of stay, ties to Canada (like property or family), and intentions about future stays.

RRSP and TFSA: Tax-Advantaged Accounts

Two pivotal tools in Canadian tax planning are the Registered Retirement Savings Plan (RRSP) and the Tax-Free Savings Account (TFSA). RRSP contributions are deductible, lowering your taxable income, but withdrawals in retirement are taxed. Conversely, TFSAs use after-tax dollars, but earnings and withdrawals are tax-free.

Why Do I Need to File a Tax Return?

Beyond the legal obligation, filing your tax return can be beneficial. It’s the way to:

  • Get a refund if you’ve overpaid on your taxes.
  • Claim benefits like the Canada Child Benefit.
  • Report and pay taxes on additional income not covered by regular withholdings.

Even if you didn’t earn any income, it might still be worthwhile to file a return to claim certain credits and benefits.

A man in a suit sitting at a desk with a laptop and calculator

When is the Deadline for Filing a Tax Return in Canada?

Typically, the deadline for most Canadians is April 30th of the year following the tax year in question. If you’re self-employed, you have until June 15th. However, any taxes owed must still be paid by April 30th to avoid interest.

Corporations have a due date for filing tax returns six months after the end of their fiscal year.

Steps to Filing Your Tax Return

1. Gather All Documents and Records

Begin by collecting all relevant financial records for the year, such as:

  • T4 Slips. Details employment income and deductions.
  • T5 Slips. Reports dividend, interest, and other investment income.
  • Outlines tuition fees and may help in education-related deductions.
  • Other slips relevant to your specific income sources, such as T3, T5007, etc.

2. Choose Your Method

  • Manual Paper Forms. While traditional, it’s time-consuming and more prone to errors. Applicable forms can be found on the CRA website or at local postal offices.
  • Online Software. There are numerous platforms, so choose wisely.
  • Professional Assistance. If your tax situation is complex, or you have unfiled or late tax returns, it’s best to consult an accountant. They can ensure accuracy and may even find you additional savings.

3. Filling Out Your Return

  • Personal Information. Ensure that your full name, address, and Social Insurance Number (SIN) are accurately provided.
  • Report Income. Detail all income sources, be it employment, investments, or side gigs.
  • Claim Deductions. Look into common deductions like RRSP contributions, childcare expenses, or moving expenses.
  • Apply for Credits. Credits like the GST/HST tax credit, Canada Child Benefit, and more can be claimed based on eligibility.

4. Review

Pay attention to the details:

  • Confirm all T-slips have been accounted for.
  • Ensure accurate calculation of income and deductions.
  • Confirm your eligibility for tax credits before claiming.

5. Submit Your Tax Return in Canada

  • Paper Submission. Mail your filled forms to the CRA’s designated postal address for your province.
  • Online. Use NETFILE—a secure CRA service, ensuring a quick return processing time.
  • Wait for the Notice of Assessment (NOA). This can take anywhere from 2 weeks (online) to 8 weeks (paper). Once completed, the CRA will send a Notice of Assessment. This document is essential; retain it for your records.

What Happens If You Don’t File a Tax Return in Canada?

If you have not filed for a tax year, it’s essential to address this promptly. Here are some of the immediate consequences of unfiled tax returns:

  • Penalties and Interest: The CRA imposes a late-filing penalty, which stands at 5% of your balance owing, plus 1% of your balance owing for each full month your return is late, up to a maximum of 12 months. If you have been charged a late-filing penalty in the past three years, these rates double. Additionally, the CRA charges compound daily interest on any unpaid amount, starting from the day after your return is due.
  • Loss of Benefits: Missing out on benefits like the Canada Child Benefit, GST/HST credit, or Old Age Security can have significant financial repercussions.

Steps to Address Unfiled Returns Tax Returns in Canada

While time is of the essence when it comes to unfiled returns, it’s critical that they are filed correctly:

  1. Gather Documents. Retrieve all essential financial records, T-slips, receipts, and any other documentation pertinent to the missing years.
  2. Prepare the Returns. It’s crucial to complete a separate return for each year you’ve missed. This CRA webpage has links to tax packages for all years.
  3. Submit the Returns. Remember to label and mail each year’s return separately to the CRA. Or, if you’re using NETFILE, ensure you are compliant with its criteria for past years.
  4. Address Outstanding Amounts. Settle owed amounts promptly. If paying the full amount is challenging, contact the CRA to discuss potential payment arrangements or relief.
  5. Consider the Voluntary Disclosures Program (VDP). If you’ve omitted information or made errors, the VDP might be beneficial. It offers a chance for taxpayers to voluntarily rectify past financial mistakes related to their tax reporting. Acceptance into the VDP could save you from penalties or prosecution, but it’s essential to approach this with all required information and preferably with professional advice.

Tips for a Smooth Tax Filing Experience

  • Stay organized and keep all your tax-related documents in one place throughout the year.
  • Understand your eligible deductions. Get familiar with possible deductions and credits to minimize your tax liability.
  • File early and give yourself ample time before the deadline to avoid stress and potential mistakes.
  • Stay updated on tax rules, which are constantly changing, and keep an eye on announcements from the CRA.

In Conclusion

Taxes are a part of life in Canada, and while they might seem intimidating, breaking the process down step by step makes it manageable. Whether you’re filing your return for this year or catching up on past ones, it’s always beneficial to be informed and proactive.

About the Author

pro-tip

Pro Tip

ACCESSING THE SMALL BUSINESS DEDUCTION IN YOUR BUSINESS

The Small Business Deduction gives businesses a tax deduction on the first $500,000 of income. This saves an eligible corporation around up to $50,000 in income taxes. There are a number of conditions that have to be met to be eligible for this deduction.

I was referred to Mr. Faris by another professional who recommended him to deal with my multiple years of outstanding corporate and tax returns. I interviewed Sam and was impressed in his confidence and transparency. He did not promise the moon just to get my business. Sam was able to file all returns under the voluntary disclosure program. After completing filling all tax returns, I realized the amount of money he saved me. I enjoyed very much working with him. He ensured that the work progress flow smoothly without any complications. He took to consideration the emotional stress factor and he was available to speak with me even beyond business hours just to make me more calm and to make me feel that he is on top of the matter and it will be resolved to my satisfaction. Indeed, this is what happened. The matter was resolved to my satisfaction and CRA concluded that the returns which Sam filed are reasonable and there is no need to further audit me nor my company. In summary, Sam is a life saver. He saved me and saved my family and now I am in the right track where all my tax filing obligations are met and I don’t owe any taxes. So grateful to Sam and his dedication while working on my file.
Sam is an excellent CPA and the best tax consultant in the country. He helped me to deal with a very complicated tax audit with the CRA where the CRA sent me a proposal assessment of 1.5 million dollars based on their net worth audit calculation and analysis. Sam was able to provide a counter analysis which highlighted significant mistakes that the auditor made with his assumptions and calculations. It’s ridicules that CRA wanted to taxed me on a loan that I obtained from my bank. Sam dealt with this audit perfectly. He demonstrated a very high level of expertise and CRA had to accept his counter analysis with no question asked. Many thanks to Sam’s efforts and high business standards in dealing with this issue and resolve it to my favor. I will have Sam as my primary CPA going forward so I can focus on doing business and will have a peace of mind in terms of the high quality of work done by him. Well deserved this review with the 5 stars rating.
Sam Faris helped me with a complex cross border tax matter. This issue involved 12 years of tax returns and it was as a result from mistakes that my previous accountant did. He was able to perfectly address the issue with the CRA and to fix the returns under the voluntary disclosure program. End results; CRA accepted Sam’s work with not a single question and the returns were reassessed to my satisfaction without penalties and interest. Many thanks to Sam brilliant work.
Response from the owner:Dear Sir It was a pleasure working on your file and get you the results that you aimed to have and to your satisfaction. We have been dealing with similar cases for many years and we were confident that the results are favorable. Please feel free to contact us in the future if you do require further help.
I found Sam’s firm online and I read the excellent Google reviews about him and his team. I decided to hire him to help me navigate an issue with the CRA. Sam delivered as expected and as promised. Results were to my satisfaction and I am very happy with how the process was handled. Highly professional and extremely knowledgeable.
Response from the owner:Dear Tanya Thank you for the 5 stars Google review and your kind words. We strive to provide the best customer service and make our clients relax and calm during the process. The cases we are taking are very sensitive so providing quality work to the CRA is extremely important so just to avoid any escalation and to make sure that our package is accepted from the first round. We will remain at your disposal anytime you require our services. Sam Faris
You will notice Sam is very quick with his responses. He knows his stuff and gives solid advice. Highly efficient, would recommend.
Response from the owner:Dear Jay Thank you for the 5 stars positive review. Working with you was pleasant too. Many thanks for your business and please do feel free to contact me if you have any questions. Sam Faris
after the initial assessment I had with Sam, he proposed a strategy to dispute CRA decision. He knew up front how to approach my case as he seemed that he dealt with similar cases many times. I hired him the end results were as promised and no surprises. Sam is very trust worthy and has a high business standards. May thanks Sam.
Response from the owner:Many thanks for the positive review.
I recently turned to Faris CPA for help with my tax filing, and I must say, I'm over the moon with the results! The whole process was a breeze, saving me time and stress. What really stood out was the friendly professionalism, impressive expertise, and crystal-clear communication from Sam and his team. They made what could've been a daunting task feel like a walk in the park! If you're looking for a warm, approachable tax expert who genuinely cares about his clients, I wholeheartedly recommend Sam and the folks at Faris CPA - they're great tax consultants!
Response from the owner:Many thanks.
Working with Sam and his team was an extremely valuable experience. One of the best Tax consultants in Toronto I've ever come across.

He has a ton of experience resolving problems with the CRA and was truly a big asset to me when I had issues I needed help with.

Would highly recommend Sam and Faris CPA, thanks again for all the great work!
Response from the owner:Thank you Paul for your positive feedback and we are glad we met your expectations.
I had an amazing experience working with Faris CPA for my CRA needs. They really know the CRA processes and made everything so easy. They were super professional, always ready to answer my questions, and made sure everything was done right. I couldn't have asked for better help. Highly recommend their services for anyone dealing with the CRA! -Sara
Response from the owner:Thank you Sara for the 5 stars review.