Essential Canadian tax terminology: Brush up on your lingo!

Credit to Author: Canadian Immigrant| Date: Mon, 08 Apr 2024 22:20:26 +0000

Only 14 per cent of Canadians are very confident in their understanding of tax-related terminology finds a poll conducted by TurboTax Canada. According to the survey findings, 27 per cent of Canadians have never heard of the term NETFILE.

This lack of clarity can lead to confusion and increased stress during filing season. More so for those who are new to Canada or with English as a secondary language.

Here is a list some of the key Canadian terms compiled by TurboTax Canada to help navigate the complexities of the tax season.

Balance Owing: The remainder when your payable amounts are higher than your credits and deductions. It means that you need to pay an additional amount of tax and can happen if your taxes weren’t properly deducted or accounted for throughout the year.

Carry Forward: When you have certain credits available during filing, but you don’t use them, you might be able to keep these credits and have them available on your account to claim in a later year. Tuition tax credits are a good example of this.

CRA: The Canada Revenue Agency, which is responsible for collecting taxes and providing different credits and benefits to Canadian citizens. They receive your tax claims, calculate your return, and send you a Notice of Assessment.

Credits: These are dollar-for-dollar reductions on the income tax you owe and are usually offered by the government to encourage Canadians to make financial decisions that benefit the economy or environment. Credits usually have requirements that you need to meet before they can be claimed.

Deductions: Similar to credits, deductions are amounts that add to your expenses throughout the year that can be used to reduce the amount of tax you have to pay. Some examples include childcare expenses and donations.

Dependent: A dependent is quite literally dependent on you for support at any point during the tax year. This term most often applies to children but may also refer to seniors or individuals with specific circumstances that make them dependent on you and your income.

NETFILE: A digital tax filing service that allows you to file and send your tax return directly to the CRA. NETFILE certified software like TurboTax can give you immediate confirmation that the CRA has received your return, and you get your refund much faster as well.

Notice of Assessment: A document that is sent to you by the CRA to confirm the details of your return after it’s been assessed and contains the details of the refund you’ll be getting.

Refund: When you have more credits and deduction amounts than what you need to pay, you’ll receive a refund. This is essentially the opposite of a balance owing, as it usually happens when you’ve paid more tax throughout the year than what you owe.

Self-employment: Self-employed individuals don’t work for a company or organization directly, and usually earn income through trades, services, or a business These individuals will have different tax considerations and claims amounts to consider.

Social Insurance Number (SIN): The nine-digit number that identifies you to the CRA and is needed to be able to work in Canada. It’s also necessary if you want to receive benefits and services from the government.

Tax bracket: The different levels of income that determine how much taxes you owe. These come in preset levels, and your income will fall into one of the brackets to outline how much taxes you owe.

Tax slip: This refers to any kind of form or a slip you receive related to your taxes. For instance, the T4 Form that outlines your income and earnings. A T4A slip identifies amounts paid during the calendar year for income from many different sources including self-employed commissions and RESP educational assistance payments. A T5 tax slip identifies any interest income you’ve earned on non-registered investments.

Tax return: The general term used to refer to the set of forms and documentation you provide for filing your taxes every year. It’s usually extensive and covers all forms of income, earnings, deductions, and credits that are used by the CRA to assess whether you’ll have a balance owing or a refund.

Tax year: The dates from the 1st of January to the 31st of December which you’ll use for tax purposes. You will usually file your taxes for the year prior, though in some situations you might be able to file for years that are even further back.

For individual filers, the income tax deadline is April 30, 2024. For self-employed individuals, the income tax deadline is June 17, 2024, however, if you owe taxes, you are still required to submit payment to the CRA by April 30, 2024, even if you are self-employed.

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