Who needs to file a tax return?
There are just four days left until April 30, the tax filing deadline for most Canadians. As of last week, the Canada Revenue Agency reports that it has already processed and assessed 13.1 million tax returns, 86% of them having been filed electronically. Of those returns, just 13% had a balance owing, 20% were nil returns and the remaining 67% received a refund averaging $1,585.
But what if you don't actually owe any taxes this year - do you still have to file a return?
Under the Income Tax Act, an individual is required to file an income tax return for a year in which they have tax payable. This holds even if taxes withheld at source, such as by your employer through payroll, exceed the amount of tax actually payable.
You must also file if you are electing to split your pension income with your spouse or partner, you disposed of capital property such as real estate or shares in 2012 or you received a capital gains distribution from a mutual fund. In addition, if you have to repay part of your Old Age Security or Employment Insurance benefits or you have outstanding amounts owing on RRSP withdrawals you made under either the Home Buyers' Plan or the Lifelong Learning Plan, you must file a return.
If you're self-employed, you'll also need to file a return if you have to make Canada Pension Plan contributions on any self-employment income above $3,500. The good news, however, is that you (and your spouse or partner) actually have until June 17 to file your return this year since the normal filing deadline of June 15 falls on a Saturday in 2013. That being said, you still have to pay any balance owing by April 30 so it's a good idea to at least prepare a draft of your return this weekend to ensure that payment is made on time to avoid any arrears interest being charged.
The CRA advises, however, that even if none of these requirements apply, you may still wish to file a return if you want to claim a refund, you want to apply for the GST/HST credit, you want to begin or continue receiving the Canada child tax benefit payments, you incurred a loss that you wish to be able to carry back or forward to another tax year or you want to carry forward or transfer the unused part of your tuition, education, and textbook amounts. In addition, if you want to make an RRSP contribution in the future and had earned income in 2012, the only way to get your RRSP limit updated with the CRA is by filing a tax return.
The penalty for late-filing a return is 5% of any amount owing plus an additional 1% of the outstanding balance owing for each full month that your return is late, to a maximum of 12 months. Those penalties can double if you were subject to a late-filing penalty for any of the previous three tax years.
Finally, note that April 30 (or June 17) is also the deadline to file Form T1135 to report ownership of foreign property if the total cost of that property was more than $100,000.