Do I Have To File Taxes? No, But You Should! Here’s Why…
Fee-for-service financial planner and founder of PlanEasy.ca
Do you have to file taxes each year? Technically no, if you meet certain criteria, but you probably should anyway.
Filing taxes doesn’t have to be difficult. There are many great tools and resources that can help make filing taxes easy. But the longer you put it off the more difficult it will become. So even if you don’t need to file it’s a good idea to do it every year.
Technically the government doesn’t force you to file taxes unless you meet certain criteria. If the government owes you money in the form of a tax refund then they’re happy to hold onto that money for you indefinitely. As you’ll see below, there are certain criteria that the government looks at when determining if you need to file a tax return or not.
But even though you may not NEED to file a tax return you probably should. There are many good reasons to file your tax return each year.
Not filing a tax return may mean that you’re leaving money on the table, not just in the form of a tax refund but also the potential government benefits that you may be eligible for.
Do You Have To File A Tax Return? Technically No But…
Technically you do not need to file a tax return but most of us will need to because we’ve met certain criteria. The CRA has a clear list of criteria to help you understand if you need to file a tax return.
You will definitely need to file a tax return if you owe money to the government, the CRA is pretty serious about getting everyone to pay their taxes. Employers, banks, brokers, and other companies need to submit tax forms on your behalf so the CRA has a pretty good idea of your tax situation already.
You also need to file a tax return if you want a refund, but if you don’t want your refund then technically they don’t force you to file … but why wouldn’t you want your tax refund?
You also need to file if you’ve had any financial transactions that the government wants to know about. For example, did you sell a principal residence last year? The sale may not be taxable, but the CRA wants to know about it, so you have to file a tax return.
Here is the link to the complete list of reasons that you need to file a tax return… but we’ve also made a quick summary of the main reasons you would need to file below…
You have to file a tax return if…
- You owe tax to the government
- You want to receive government benefits like…
- Canada Workers Benefit (CWB)
- Canada Child Benefit (CCB)
- GST/HST Credit
- Guaranteed Income Supplement (GIS)
- You received a request to file from the CRA
- You want to split income with a spouse
- You sold your principal residence
- You used the RRSP Home Buyer Plan (HBP) or Life-Long Learning Plan (LLP) and need to make repayments
- You want to record employment income that will increase your RRSP deduction limit
- You have to contribute to CPP (anyone with employment income above $3,500 has to contribute to CPP)
- And more…
Is Age A Factor?
Nope. Age doesn’t matter when it comes to taxes. If you earn income, any kind of income, or if you need to report for any of the other reasons above, then you need to file a tax return.
Does your child need to file a tax return? Possibly, did they earn any income this year? Does your 90-year old grandmother need to file a tax return even though they pay zero tax? Definitely, if they want to continue receiving seniors benefits in the future.
If you have a 1-year old with some income (acting income maybe?) then as a parent you need to file a tax return on their behalf.
If you’re a 90-year old senior and only receive CPP, OAS, GIS and haven’t owed tax in over 25-years thanks to basic tax credits, then you still need to file a tax return to ensure you continue to receive government benefits in the future.
If you’re a student who hasn’t earned a penny in employment income but received grants and/or scholarships then you need to file a tax return because that still counts as income (you’ll get a T4A slip instead of a T4) and you probably want to carry forward any education credits you receive.
What Are The Benefits Of Filing Taxes?
There are lots of benefits to filing taxes every year, even when you don’t really need to. It’s often in your best interest to file because most government benefits are based on the income reported on your tax return. The government will not pay these benefits unless you file a tax return.
Every year I provide talks on government benefits to low and moderate income families. These families are eligible for many different government benefits. Every year there are at least 2-3 people who haven’t filed their taxes. Sometimes they haven’t filed in 1, 2, 3, 4 …. 7, 8+ years.
Although it’s possible to get some government benefits paid retroactively, waiting 8+ years to file a tax return means you’re leaving money on the table.
Even if you’re not eligible for government benefits, there are still reasons you will want to file…
- Keep on top of your taxes: Filing taxes after a few years is a pain. Stay on top of it to avoid a huge hassle in the future
- Avoid possible fines/penalties: Filing taxes late means that the CRA could impose fines and/or penalties. These are stiff. You want to avoid this.
- Avoid an audit: Tax audits are a pain. Avoid getting an audit by staying on top of your taxes and keeping meticulous records.
- Get the government benefits you’re eligible for: If you don’t file, you won’t receive government benefits. Period. So file your taxes.
Filing Taxes Is Easy
Filing taxes doesn’t have to be hard. There are wonderful online tools available to help you file your taxes for free. Tools like SimpleTax offer free tax filing and are easy to use. They walk you through a series of questions and the whole experience can take less than an hour.
Plus, if you’re a low-income individual or a low-income family then you have additional options for filing your taxes. The Canadian Volunteer Income Tax Program (CVITP) is a volunteer run program that is organized by the CRA. Every year thousands of volunteers help low-income individuals, low-income families, low-income seniors etc. etc. file their taxes. These one-on-one sessions are often 30 min to 60 min long. A volunteer helps you organize your documents and at the end of the session you’ll have a completed tax return!
So even though you may not be required to file taxes you should always do so. For most situations it’s easy to do and it could take as little as 30 to 60 minutes if you use an online tax software.
Filing your taxes each year will ensure that you’re receiving the government benefits you’re eligible for and that you won’t run into issues down the road.
Financial planner, personal finance geek and founder of PlanEasy.