RESOURCES

Do I Really Have to File a Personal Income Tax Return?

By Conrad Funk, CPA, CA

Are you required to file a tax return every year?  Yes in most instances, but not always.  There are certain instances where it’s not required.  However, you should file a tax return every year and it should be filed on time.  If you don’t, you can lose some of the government credits and benefits that are available.  Some credits and benefits will be paid retroactively if you do file a tax return late and others will not.  All of the credits and benefits are tax-free meaning you get to keep all of it and it will not cause you to pay additional income tax in the current year or in future years.

I will go through some of the main reasons and programs that are available simply by filing your tax return.  The information is based on 2017 tax returns filed in Saskatchewan.

Tax refund

If you’ve worked as an employee during the year you should receive a T4 slip.  This slip summarizes your wage and various deductions your employer has withheld from your paycheques.  If you file your tax return chances are you will get a portion or sometimes all of the income tax back that your employer withheld from your paycheques.  

Basically what your employer is doing is estimating how much tax you will owe on your income and are remitting it to the government on your behalf.  Filing of your tax return will determine the correct amount with the amounts remitted on your behalf being applied against that calculation.  If you have overpaid, there will be a refund available to you.   

 
Working Income Tax Benefit (WITB)

The WITB is a refundable tax credit that supports low-income workers.  If you have a job and receive income in the applicable range, you may be paid the benefit when you file your tax return.  It simply gets lumped in with your tax refund.

Max WITB

Single - $1,043 paid between working income of $7,171 & $11,838 reduced to $0 by $18,792

Family - $1,894 paid between working income of $10,576 & $16,348 reduced to $0 by $28,975

Disability amount up to $521 for individuals eligible for the Disability Tax Credit

 
GST Credit

The GST credit is a non-taxable quarterly payment that helps individuals and families with low and modest incomes offset all or part of the GST that they pay.

The maximum credit ranges from $427 with no children up to $1,148 with 4 children.  The maximum credit is paid up to around $36,000 of family net income.  The credit decreases as income increases over the $36,000 of net income.

The GST credit may be paid if you file your tax return late or forgot to apply for it in a prior year.

 
Saskatchewan low-income tax credit

This credit is funded by the Province of Saskatchewan.  It is a non-taxable amount paid to help Saskatchewan residents with low and modest incomes.

The program provides $346 for an individual, $346 for a spouse or common-law partner (or for an eligible dependant), and $136 per child under 19 years of age (maximum of two children), or an annual credit of up to $964 per family.

The credit starts to be reduced when the adjusted family net income is more than $32,643.  Families with adjusted family net income between $32,643 and $67,697 may get part of the credit.

This amount is combined with the quarterly payments of the federal GST credit.

 
Disability Tax Credit (DTC)

The DTC is a non-refundable tax credit that helps persons with disabilities or their supporting persons reduce the amount of income tax they may have to pay. An individual may claim the disability amount once they are eligible for the DTC.  This amount includes a supplement for persons less than 18 years of age at the end of the year.  For 2017 the non-refundable credit for the disability amount is $8,113 and the supplement for children under the age of 18 is $4,733. Non-refundable credits reduce the amount of tax you have to pay.  If you don’t pay any tax, the non-refundable credits will simply not be used.  They cannot be carried forward to future years.

In order to qualify you would need to fill out the required form and have a medical practitioner fill out certain parts of the form and certify it.  Generally this would be a doctor, but other medical practitioners can certify it as well.  To find out more about the criteria you should speak with your accounting professional.

The purpose of the DTC is to provide for greater tax equity by allowing some relief for disability costs, since these are unavoidable additional expenses that other taxpayers don’t have to face.
Being eligible for the DTC can open the door to other federal, provincial, or territorial programs such as the registered disability savings plan, the working income tax benefit, and the child disability benefit.
A child is eligible for the disability tax credit when a medical practitioner certifies that the child has a severe and prolonged impairment in physical or mental functions, and the Canada Revenue Agency (CRA) approves the T2201 form.  The T2201 for generally only has to be filled out every few years and if the disability is permanent may only have to be filled out once.
Registered Disability Savings Plan (RDSP)
The RDSP allows parents to deposit money into an account for a disabled child so they can access it when they become adults.  The government matches up to 300% of what is deposited into the account.  So, if you would deposit $100 into an account, the government would match with a $300 deposit.

 
Canada Child Benefit

The current Liberal government replaced various credits and benefits with the Canada Child Benefit.  If you have children and there is any one reason to file your tax return, this would be it.  The maximum benefit per child is $6,400 for children under the age of 6 and $5,400 for children aged 6 to 17.  The benefit starts being reduced with family net income above $30,000.  The benefit is completely phased out at around $200,000 of family net income.

If you have a child with a disability the benefit increases by $2,730 from the child disability benefit.

 
How to file your tax return

Free services are offered.

1.    Pick up a paper return at the post office, fill it out by hand and mail it in.
2.    CRA offers free software on their website at www.canada.ca
3.    CRA puts on volunteer clinics to offer free tax return filing.  This service may or may not be available in all areas, depending on how many volunteers are available.  The list of places where this is available can be found on the CRA website www.canada.ca.

You can pay a tax services company to file your tax return.  These places may provide the most value for simple tax returns.  

If you have to report business income or have some complicated issues a CPA firm would be your best option.  A CPA firm such as Stark & Marsh would have the resources and experienced staff to prepare a tax return properly and often provide the most value as certain credits will not be overlooked.  The deadline to file is April 30th for most individuals and June 15th if you have self-employment income.  

 
Conclusion

It is important to file your personal tax return every year and on time.  I have talked about the most common advantages of filing a tax return.  Depending on each individual’s situation, there may be more credits and benefits available.  If you would like more information feel free to book an appointment with one of our professionals.

 

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