Tax tips for newcomers to Canada
Credit to Author: Tazeen Inam| Date: Thu, 30 Mar 2023 15:29:26 +0000
Filing a tax return may seem complicated but it allows newcomers access to refunds, credits and benefits that could help with settlement expenses.
Newcomers may find it a little daunting to file a tax return in Canada. The process can seem overwhelming but it doesn’t have to be complicated since there are many available resources to help understand the fundamentals. However, it is important to file them on time to avoid penalties and to access tax refunds.
Namrta Mohan
“Filing a tax return is as important as getting a health card,” says Indian-born Namrta Mohan, a Peel Region-based registered psychotherapist, who arrived in Canada in 2013 with her husband and a toddler. Mohan found filing their first tax return challenging as she had to familiarize herself with a system different from her country of origin.
She still remembers working through the process and receiving her first refund. “Any amount was helpful in those days, it supported us in our settlement process.” she says.
After the first couple of years, Mohan realized she had missed claiming a few benefits. Which is when she decided to seek the help of an accountant who introduced her to many family benefits that she could claim and simplified the process for her.
“She [the accountant] was very knowledgeable; she told us about first-time home buyer benefits, Trillium health benefits and, most importantly, about the recreational benefits that we claimed for my son,” she says. While Mohan found her accountant “quite randomly” by following a sign next to her bank, she suggests that some newcomers might find it beneficial to find an accountant in their community who speaks the same language, which could help them communicate better and also feel more comfortable sharing their personal information.
Mohan also learned to save all the medical and grocery receipts for Goods and Services Tax/Harmonized Sales Tax (GST/HST) credits, “My accountant educated us and we got better returns the next time.”
Why should you file taxes as a newcomer?
Canada’s tax system is progressive, which means lower the income higher are the benefits. The Canada Revenue Agency (CRA) creates tax brackets to determine the specific personal income tax rate depending on the range of income.
Under Canada’s tax system, income tax obligations are based on residency status. Those with significant residential ties to Canada such as a home (whether owned or rented), a Canadian bank account or driver’s license, living with a spouse or dependents are required to pay their taxes. To receive benefits and tax credits, residents have to file your income tax return on time, even if you have no income in the year. This also applies to a spouse or a common-law partner without any income.
Many new immigrants may not be aware of this and delay filing their return. But tax experts explain that not filing on time is a big mistake, since this could come in the way of receiving benefits they are entitled to such as the Canada child benefit, Climate Action Incentive payment, etc., in addition to benefits from certain provincial programs and interrupt continuing benefits such as the caregiver benefit and GST/HST credit. This could lead to penalties or interest if taxes are owing.
Enoch Omololu
“You may not qualify for the benefits or even if you qualify for them, you may not receive all of it, simply because you haven’t filed a tax return,” says personal finance expert Enoch Omololu and Founder CEO of Savvy New Canadians, who stresses the importance of filing returns in the first fiscal year of landing.
Enoch Omololu came to Canada in 2011 to pursue his post-graduation at University of Manitoba and filed his first return as a student.
“A newcomer who wants to get ahead of the curve would file taxes right away,” he says.
Omololu says that even a part-time job like “food delivery income is taxable” and it’s important to declare this income. “And the reason for that if you don’t want to get audited because it’s a painful process.”
Most international students completing a degree in Canada on a study permit are considered residents for income tax purposes; however taxes are based on an individual’s specific circumstances. In addition to the other credits, international students can claim tuition credits, and other provincial credits or tuition rebates.
Jeffrey Zhang
Jeffrey Zhang, District Manager, H&R Block, Victoria B.C., emphasizes the importance of reporting foreign property/wealth that is over $100,000 worth in the second year of residency. Any income earned outside of Canada is non-taxable (depends on the treaty with the country) but should be declared.
“Not reporting foreign wealth is a big mistake that newcomers often make, and when they file it there’s a huge penalty as well as interest is levied,” says Zhang.
Zhang advises newcomers to get organized by using file cabinets, folders and tagging each envelope from first day of their landing.
“Because they don’t know what tax is related or relevant. So, keep the documents organized throughout the year,” he says.
Zhang also strongly recommends consulting a professional accountant in the initial years, because otherwise he says “it’s a nightmare to fix. Raising any red flags with CRA that may lead to a rabbit hole of audit process.”
Scammers start to sprout as the tax season is in progress. They send dire warnings and try to trick taxpayers to pay money that they don’t owe. Often, it’s via text messages, phone calls or emails asking them to click the link. Zhang says that CRA never ask for e-transfers or click on links sent via emails.
“The general rule is if you have a doubt, do not answer the call. And if you’re not sure, call back! There are published number on website for Canada Revenue Agency,” he says.
Newcomers can find information on scam prevention on the CRA website to protect themselves from fraud.
Find help to file your taxes
Based on certain criteria, a simple tax return can be done with the help of a volunteer from the Community Volunteer Income Tax Program (CVITP), for free at any Canada Revenue Agency (CRA) tax preparation clinic, using the CRA web page or the MyCRA mobile web app. Some educational institutions also offer on-campus workshops and filing support to international students.
The deadline to file a return is April 30. This year, since April 30, 2023, falls on a Sunday, returns will be considered filed on time if the Canada Revenue Agency (CRA) receives it, or it is postmarked, on or before May 1, 2023. Entrepreneurs have until June 15, 2023 to file their returns.
Visit the CRA website for more information about the 2023 tax filing season.
The post Tax tips for newcomers to Canada first appeared on Canadian Immigrant.
http://canadianimmigrant.ca/feed