Who Should be Filing a Tax Return?

Requirements to file an income tax return

Should I file my return this year? Do I have to? and What if I don't?

To all intents and purposes,filing an income tax return is not required by Canadians unless they owe the government taxes, sell capital property or the government writes to them requesting they file.

Who Must? Who should? Who does not have to submit an income tax return? are questions which a lot of Canadians ask every year.

The Canadian tax system is a self assessment system in that taxpayers voluntarily submit information on income from all sources worldwide. Taxes are imposed on the basis of residency and income sources. Residency meaning: Does the taxpayer normally live in Canada or have strong ties with the country?

Residents can also be taxed on income earned abroad. For example, if a Canadian goes to work in a foreign country. The taxpayer may also face paying taxes in the foreign jurisdiction.

Canada has entered into tax treaties with several countries to prevent or minimize double taxation.

From a tax planning perspective, a person could choose to pay taxes to the jurisdiction which is most advantageous to her all things considered.

Non residents are taxed on the income which they earn in Canada only.

Benefits of Filing

For many reasons, it is very beneficial and advantageous, to file a return. The tax return does more than calculate taxes owing. It is in essence, an application for various government programs available to taxpayers. Child tax benefits, Canada pension, GST, provincial tax credits, are just some examples.

Simply stated, Don’t file, Don’t collect!!!

Why is this so important? Who should file?  There are three basic categories: Those who Must file, Those who Should file and Those who are not required to file.

The first two categories are where most tax payers get into trouble and are the most costly, because of the penalties imposed for non-compliance.

If you fall in the Must file category and do not comply, the government can impose severe penalties, including fines and imprisonment.

If you fall in the Should file and you do not comply, you in effect impose a penalty on yourself, due to the loss of refunds or benefits

Filing an Income Tax Return

You must file a return, if any of the following conditions apply

1.   You received a demand from CRA requesting you to file a return

2.   You owe more taxes for the year than has been withheld at source

3.   You or your spouse ,if applicable, are entitled to receive Child tax benefits

4.   You have a taxable capital gain

5.   Have to  repay any portion of Old age or Employment Insurance benefits

6.   If you still owe money to your RRSP under the Home Buyer or Lifelong Learning Plans

7.   You have to pay Canada Pension contributions on qualifying income $3500 or greater.(Usually the self employed)


You should file a return if the following conditions apply

1.   More taxes have been withheld than required in other words, you get a refund

2. Take advantage of carry forward provisions for tuitions,RRSP  contribution limits,and non-capital losses

3. To record a capital gain from a qualified farm property or small business corporation shares for future use with the capital gain exemption

4.   Take part in the various government programs mentioned before.

You Do not have to file if the following conditions apply

1.   You had no tax payable on income for the year

2.   You were a non-resident throughout the year and did not have any taxable capital gain

3.   The government did not request that you file.

Filing Penalties