Why Should I File A Tax Return?
If you have to pay tax or have earnings on which CPP contributions must be
paid, you must file a tax return. You must include your worldwide earnings in
your taxable income. You will usually have to pay tax if your taxable income
exceeds the amount of the basic personal exemption. See the tables of
non-refundable tax credits for amounts for federal and provincial/territorial
basic personal exemptions and other tax credits. If you have net self-employment
income or pensionable employment income in excess of $3,500, you may have to
remit CPP contributions.
There are other circumstances which also may require a tax return to be filed:
- You were requested by the Canada Revenue Agency (CRA) to file a return.
- You have disposed of capital property (real estate or investments, for example) during the tax year.
- You claimed a capital gains reserve on your previous year's tax return.
- You have withdrawn amounts from your RRSP under the Home Buyers' Plan or the Lifelong Learning Plan, and have not yet repaid the entire amount.
Even if you are not required to file a tax return, it will often be to your advantage to do so, for some of the following reasons:
- You have had tax withheld from your income, and want to receive a refund.
- The federal government and some provinces have refundable tax credits, which are payable to you even if you have no earnings and have paid no tax. This means they will send you a cheque for the tax credit! This includes the federal Working Income Tax Benefit, which is new for 2007.
- You want to apply for the GST/HST credit - If you are 18 years of age or older, you should file a tax return even if you have no income, in order to apply for the GST credit. You must be 19 to receive the credit, but if you will turn 19 before April 1 of the following year, you should apply now so that you will receive your first GST payment as soon as possible after you turn 19. Some provinces have benefits similar to the GST credit. By filing your tax return, you are applying for these benefits.
- You want to apply for the Canada Child Tax Benefit - In order to receive or continue to receive Canada Child Tax Benefit (CCTB) payments for your children, you and your spouse must both file tax returns. CCTB payments are non-taxable monthly payments made to eligible families with children under age 18. To learn more about the CCTB, visit the CRA web site CCTB page. Many provinces and territories also pay benefits to families with children. By applying for the CCTB and filing your annual tax returns, you will be eligible to receive these benefits. For more information, see the CRA page on provincial and territorial child benefit and credit programs.
- You have "earned income" for RRSP purposes. Even if you do not wish to contribute to an RRSP currently, the earned income amounts can be carried forward indefinitely. Also, you can contribute to an RRSP, up to $2,000 more than your RRSP deduction limit, and wait until a future year (when you are making higher income) to deduct the contribution. This gives your retirement fund an early start.
- For seniors who are receiving the GIS (Guaranteed Income Supplement), filing of their annual income tax return automatically renews the GIS. For more information on the GIS, see the article on GIS information on the Seniors page.
- You have a non-capital loss, which you can carry back to prior years or carry forward to future tax years.
- You have unused tuition, education and textbook amounts that you would like to carry forward to use in the future.