Learning to navigate the Canadian tax system will make your life here a lot easier. Once you become employed, you will see that a good chunk of your earnings goes to taxes, maybe more than what you were used to in your native country. These taxes come back to you in the form of effective public services and many gratuities that make Canada one of the most sought-after destinations for immigrants. Not only that, but you can recuperate part of your taxes and access tax credits by filing a yearly tax return.
How to file your taxes
You can file for a tax return as soon as you arrive in Canada. Go to an immigrant settlement agency and they will assist you with filling in the forms. You will be asked to state your income and that of your spouse for the two years prior to arriving.
Every year, during tax season (in spring), you will need to file an income tax return for the previous year. You should receive an income tax package in the mail from the Canada Revenue Agency (CRA). You can also download it or order it online from the CRA website (www.cra-arc.gc.ca), you can order it by phone or you can pick one up at postal offices or income tax offices.
Filing for a tax return is easy. You can file your taxes by mail, online or by phone. To file your taxes by mail, you need to fill in the form received in your income tax package and mail it to your local tax centre.
To file online, you need to use tax software certified by the CRA. You will use this software together with a service called NETFILE, for which you will need an identification code. You can find this code on the T1 tax form you will get in the mail, or you can request a code by phone from the NETFILE helpdesk. In order to file online, you need to have filed for taxes before in Canada at least once.
For simple income returns, you also have the option of filing your taxes by phone, using a service called TELEFILE and the tax return forms you receive in the mail. Just as with NETFILE you need to have filed for taxes at least once before.
Still, if you feel overwhelmed, you can pay for the services of a tax professional or look for a professional or a charity that volunteers to help people with filing their taxes.
What are tax credits?
Tax credits are sums deducted from the total taxes you owe. Depending on your situation, you may be eligible for one or more types of tax credits. A few examples of Canadian tax credits are: the Low-Income Tax Credit, the Child Care Tax Credit, the GST/HST Tax Credit, the Education Tax Credit or the Medical Expenses Tax Credit.
When claiming certain tax credits, you may be asked to support your claim with specific documentation.
The CRA website (www.cra-arc.gc.ca) contains detailed instructions on how to file for the different types of tax credits.