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So who must file an income tax return for a given year?
| Guest post by: Brenda Parker |
Article Overview: It's now an annual ritual. Once the new year rolls around, the focus changes to income tax. For many, their reason for filing is clear cut. They have taxable income, so they must report it or face the consequences. However, for others, their reason for filing is not always clear to them. If they have no income, they may figure that there is no need to file. However, there are reasons to file other than simply to pay tax on earnings.
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Free Download - Accounting - Beyond the Tax Return By Brenda Parker |
So who must file an income tax return for a given year?
Oh, if only I were a grown up.
We hear it all the time from kids. We were guilty of it ourselves when we were little. Oh, if only I were a grown up. I could eat all the candy that I want, stay up late and make lots of money for myself. I can't wait to grow up! Now, as grown-ups we often say, "oh to be a kid again!" We could sleep in and not worry about the taxman.
It's now an annual ritual. Once the new year rolls around, the focus changes to income tax. For many, their reason for filing is clear cut. They have taxable income, so they must report it or face the consequences. However, for others, their reason for filing is not always clear to them. If they have no income, they may figure that there is no need to file. However, there are reasons to file other than simply to pay tax on earnings.
So who must file an income tax return for a given year?
1/ Anyone who owes taxes in excess of what was already withheld on their behalf.
2/ If you have earnings equal to or greater than $3,500 you'll need to pay CPP contributions even if your income is below taxable levels.
3/ Both the taxpayer and their spouse/common-law partner must file to continue receiving the Child Benefit. If separated, only the parent receiving benefits needs to file for this purpose.
4/ Anyone who has disposed of capital property in the year or may have a capital gain to report from a reserve claimed in a prior year even though they may have exemptions or losses to offset the tax.
5/ Anyone who has to repay all or part of their Old Age Security because their income exceeded $63,511, EI benefits if overall income exceeded $50,000 or anyone who has not repaid all amounts withdrawn from their RRSP under the Home Buyers Plan or Life-long Learning Plan.
7/ If you ceased to be a Canadian resident and had capital property at the time.
8/ If CRA demands that you file a return
Positive reasons why you should file a return ?
1/ If you have had tax withheld or otherwise paid to the government during the year. This is the method of getting it back if it should be yours.
2/ If you don't file, you'll miss out on benefits such as the child tax benefits or the GST credit and for seniors, benefits such as OAS and the Guaranteed supplement
3/ You may have a capital loss or you may be a student and have excess tuition/education/textbook amounts that you won't need this year but may be useful in other tax years.
4/ If you have income eligible for RRSP contributions, even if you are not making any contributions currently, they can be carried forward for future RRSP contribution room.
5/ You may have investment tax credits which you do not need for the current year, but by filing, they become available for use in other tax years.
Now, back to the topic of children again. You probably don't want to ruin their outlook on being an adult too soon, but if they do have earned income for income tax purposes, filing a return for them is a good idea even if their income level is below the taxable threshold. This will create RRSP contribution room for them in the future and increase their lifetime RRSP contribution limits.
Another advantage would be in the case where the child has foreign investment income (make sure you consider the attribution rules first). For example, in the US, the American government will withhold tax at its general 30% rate rate. This can be reduced to the 15% treaty rate upon proof that the child is a Canadian resident. The most common form of proof is a statement from the CRA.
So whether you like it or not, it's that time of year again to look after your taxes. Tell your kids that they shouldn't grow up too quick.
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About the Author: Brenda Parker RSS for Brenda's articles - Visit Brenda's website
Brenda Parker operates Scotia Accounting and Tax Services located in Stellarton, NS, Canada. After graduating summa cum laude from St. Mary's University in Halifax with a B Comm in Finance and a BA in Economics, she worked for a national grocery firm in various departments with her last role being assistant manager of Taxation. During this time she attained her Certified General Accountant's designation. Since getting her CGA, she has worked in various management/accounting positions for government ,public accounting firms, and as controller of a regional hotel chain and a new car dealership. She is a Simply Accounting Certified Consultant and Quickbooks partner. In her accounting practice she has served both large and small clients in a wide variety of sectors. From personal taxes to businesses in manufacturing, wholesale, retail and services to charities and not-for-profit organizations. She has clients from Cape Breton Island, NS to Montreal, Quebec to Calgary, Alberta and in many locations in mainland NS. All information in her articles is offered without prejudice and she advises readers to consult a professional accountant in person in regards to their personal situations. Click here to visit Brenda's website   Childrens fitness tax credit Back to School tax tips 2 Home Renovation Tax Credit Dig hard for those valuable tax receipts and reap the rewards Starting Up Your Own Small Business |
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- Hi Guys,
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[quote:2y8o09c9]My goal this year is to make $200.000. Who would like to share their 2010 income goals in this thread?[/quote:2y8o09c9]
Looks like our goals are very close. I know we can both do it. Good luck to you my friend!
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[quote:1lyeuf41]My goal this year is to make $200.000. Who would like to share their 2010 income goals in this thread?[/quote:1lyeuf41]
Looks like our goals are very close. I know we can both do it. Good luck to you my friend![/quote:1lyeuf41]
Hi Trent,
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